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V1386-20 13 May 2020 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · deducción por inversiones en Canarias

Canary Islands investment tax relief requires property rental to be an economic activity

Consultants inquired whether they could apply for the Canary Islands investment tax deduction for the construction of tourist apartments. The Directorate General for Tax (DGT) ruled that, since no hotel services are provided and no full-time staff are employed, the activity constitutes income from capital rather than an economic activity.

The question raised

Whether the deduction for investments in the Canary Islands, established in Article 94 of the Law amending the tax aspects of the Canary Islands Economic and Tax Regime, would be applicable to the taxpayer.

The DGT's ruling

To apply the deduction under Article 94 of Law 20/1991, the activity must be economic. The rental of real estate constitutes an economic activity if hotel services are provided or if at least one person is employed under a full-time employment contract. If these requirements are not met, the income is classified as income from real estate capital and the deduction is not applicable.

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