Canary Islands industries transforming raw materials may apply the 50% Corporate Tax relief

The application of tax incentives within the framework of the Economic and Fiscal Regime of the Canary Islands requires strict compliance with the nature of the activity carried out. Recently, the Directorate General of Taxes (DGT) has specified the necessary criteria for companies to benefit from the 50% relief on the full amount of Corporate Tax (IS) for the sale of tangible goods produced in the region.

What the DGT has ruled

The advisory body determines that, to access this benefit provided for in Law 19/1994, the entity must carry out an industrial activity of producing tangible goods. This process must necessarily involve a manufacturing process that transforms raw materials into products that possess different characteristics from the original ones.

In specific scenarios, the DGT points out the following:

• Butchering activities: For meat butchering to be considered industrial production, the activity must be registered under the heading of utilization and transformation industries.
• Preservation processes: If the packaging of products includes sterilization or pasteurization processes, the activity is classified as the manufacture of preserves.

If these transformation requirements are met and the activity does not fall within the sectors excluded by the regulations, the income derived from the sale of such goods may qualify for the relief.

What it means for you

For industrial companies based in the Canary Islands, this criterion establishes a clear boundary between mere commercialization or minimal handling and true manufacturing activity. The key lies in the ability to demonstrate that there is a transformation process of the raw material that alters its properties.

If your business model is based on the transformation of products (such as the food sector with pasteurization or industrial butchering processes), there is the possibility of significantly reducing the tax burden on the income from that specific production. However, correct registration under the corresponding headings is a determining factor for the validity of this right.

What should be done

It is necessary to verify that the declared economic activity and the actual production process coincide with the transformation requirements demanded by the regulations. Registration under the headings of utilization and transformation industries must be checked when the activity requires it, as well as the nature of the packaging processes applied. Each operational situation must be analyzed to confirm whether it fits within the assumptions of Law 19/1994.