With the aim of correcting existing imbalances caused by insularity, which result in higher acquisition, production, and operating costs for all companies and self-employed individuals in the Balearic Islands, the approval of a Special Tax Regime is planned. This regime is designed to incentivize the reinvestment of profits obtained in the islands (provided they materialize within the archipelago itself) and to promote basic productive activities.
It is anticipated that this new Tax Regime for the Balearic Islands will be included in the 2023 General State Budget and will consist of two measures: the INVESTMENT RESERVE and the special regime for industrial, agricultural, livestock, and fishing companies:
- In the case of the INVESTMENT RESERVE, the objective is to encourage companies in the Balearic Islands to reinvest their profits in the archipelago. This involves reducing the corporate tax base, providing personal income tax (IRPF) deductions, or reducing non-resident income tax. To obtain these tax benefits, investment reserves must be allocated to the purchase of tangible assets (land, buildings, machinery, furniture, etc.), the creation of jobs, the acquisition of shares or stakes in Balearic companies, R investments, the improvement and protection of the environment, or intellectual property.
Companies will be able to reduce their corporate tax base by up to 90% of undistributed profits, while for personal income tax (IRPF), the deduction will be a maximum of 80% of the average rate for self-employed entrepreneurs for all activity derived from establishments located in the Balearic Islands.
- In the case of the special regime for industrial, agricultural, livestock, and fishing companies, businesses will apply a 10% bonus on the full tax liability corresponding to income derived from the sale of tangible goods produced in the Balearic Islands (by themselves) typical of agricultural, livestock, industrial, and fishing activities, provided that the workforce is not reduced compared to the previous year. The aforementioned bonus increases to 25% if there is an increase in the workforce of at least one person.
It is estimated that companies in the Balearic Islands will be able to save approximately €210 million in taxes annually, which will undoubtedly have a very significant impact on the Balearic economy.
