Special regime Balearic Islands 2023-2028

The seventieth additional provision of the  LPGE  for 2023 introduces the  special tax regime of the Balearic Islands with effect for tax periods beginning between January 1, 2023 and December 31, 2028


The reserve for investments in the Balearic Islands offers tax benefits to corporate income tax and non-resident income tax payers who allocate part of their profits to this reserve, provided that they come from establishments located in the Balearic Islands. The main points of the text are summarised here:

  1. Beneficiaries: Corporate Income Tax and Non-Resident Income Tax taxpayers with establishments in the Balearic Islands.
  2. Reduction in the tax base: Taxpayers may reduce their tax base by up to 90% of the part of the profit obtained in the tax period that is not subject to distribution, provided that it comes from establishments in the Balearic Islands. The tax base is not allowed to be negative.
  3. Materialisation of the reserve: The amounts allocated to the reserve must be materialised in investments within a maximum period of three years from the date of accrual of the tax corresponding to the financial year in which the allocation was made.
  4. Investment requirements : Investments must be made in assets (property, machinery, furniture, computer equipment, etc.) located or received in the Balearic Islands, used for the taxpayer’s economic activities, unless they contribute to the improvement and protection of the environment in the Balearic Islands.
  5. Early investments: Advance investments are allowed and will be considered as materialisation of the reserve, provided that the established requirements are met.
  6. Permanence and operation requirement: The investments must remain in operation for 5 years, and may not be transferred, leased or assigned to third parties; in the case of land, the period is 10 years. Otherwise, it must be replaced within 6 months and for the same book value.
  7. Incompatibility with other tax benefits : The investment reserve is not compatible with deductions to encourage certain activities or with tax benefits or state aid under European Union Law, if the accumulation exceeds the limits established in Community legislation.
  8. Beneficiaries of Personal Income Tax: Taxpayers who determine their net income by direct estimation are entitled to a deduction in the gross tax liability for the net operating income allocated to the investment reserve, provided that it comes from economic activities carried out in establishments in the Balearic Islands.
  9. Requirements for individuals: In order to benefit from the investment reserve, individuals must keep accounts as required by the Commercial Code from the year in which the profits are obtained until the assets that are the object of the investment remain in operation.
  10. Calculation of the deduction: The deduction is calculated by applying the average tax rate to the annual allocations to the reserve, with a limit of 80% of the part of the gross tax liability corresponding to the net operating income from establishments in the Balearic Islands, provided that the limits established in Community legislation are not exceeded.

More information at https://www.caib.es/webgoib/es/regimen-especial-de-las-illes-balears