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V1510-14 9 June 2014 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · reserva para inversiones en canarias

Profits from property sales may qualify for the Canary Islands Investment Reserve subject to activity and reinvestment requirements

A company based in the Canary Islands has queried whether profits from the sale of residential properties can be allocated to the Canary Islands Investment Reserve (RIC) and whether such reserves can be used to fund the construction of a nursing home. The Directorate General for Tax (DGT) has ruled that this is permissible, provided the profits derive from activities within the Canary Islands and the construction constitutes a diversification of the company's business activities.

The question raised

Whether the profit obtained from the sale of housing is eligible to fund the Canary Islands Investment Reserve and whether the same can be implemented through the construction of the nursing home facilities.

The DGT's ruling

Profits from the sale of housing may be subject to reduction if they result from the economic activity carried out in the Canary Islands. The construction of nursing home facilities is considered an initial investment suitable for implementing the RIC, as it constitutes a diversification of activity to provide a service different from the previous one. The new building will be an eligible asset provided that the other requirements of Law 19/1994 are met.

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