The President of the Government, Pedro Sánchez, explains that the general state budget for 2023 will already include 20 million euros to finance the first section of the Palma tramway.
Francina Armengol: “Now we have another tool to be much more competitive, innovative, resilient and with a more solid productive fabric”.
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The fiscal part of the special regime of the Balearic Islands, the only one that remained to be applied after the new law that compensates the extra costs of insularity with transport, energy or investment measures was approved in 2019 and after resources from the State for the insularity factor reached the Balearic Islands for the first time this year, will be included in next year’s general State budgets. This was explained this Monday in Palma by the President of the Spanish Government, Pedro Sánchez, accompanied by the President of the Government of the Balearic Islands, Francina Armengol.
Pedro Sánchez stressed that the measure will have an annual impact on the economy of the Balearic Islands of 349.1 million euros and will allow the creation of 3,191 full-time jobs, equivalent to 1% of the Balearic Islands’ GDP in 2019. The fiscal REIB incorporates two public policies, investment reserves and tax deductions and reductions for industrial and primary sector companies that generate or maintain jobs.
Pedro Sánchez announced the measure during a visit this Monday morning to the company CAROB, from Marratxí, which specialises in the processing of locust beans and is one of the companies that will be able to benefit from the special regime for the primary sector, as well as being able to access, through corporate tax, the investment reserves. Afterwards, Francina Armengol met with representatives of the social and economic agents, spokespersons of the different political parties and members of civil society in the Llotja, where she explained the details of the fiscal part of the REIB.
Francina Armengol defined the measure as “good news” that “we have fought for as a society to make it possible for the State to recognise the disadvantages that insularity generates”.
The President of the Government explained that the government is working on “measures that we have to take urgently for a winter that could be complex due to the rise in prices” and recalled that, even so, “we are in a good economic situation, with a very significant rate of economic growth and at a time when the Balearic Islands have to take advantage to continue improving because we are facing an opportunity, since the archipelago will have the most important investment cycle in our history in the coming years”.
This investment explained Francina Armengol, “will mean more public resources and more private resources than ever before, and they must be converted into more social justice, more jobs and more quality jobs”. In this sense, the President of the Govern conveyed to the representatives of civil society that “we have already shown that together we are capable of overcoming challenges and building a good social shield” and that now, through the REIB, “we have another tool to be much more competitive, innovative, resilient and with a more solid productive fabric”.
The special tax regime for the Balearic Islands will be approved as part of the general state budget for 2023 and will consist of two measures: the investment reserve and the special regime for industrial, agricultural, livestock and fishing companies.
Pedro Sánchez presents the special tax regime for the Balearic Islands
During his visit to Mallorca, Pedro Sánchez stressed that in the case of the investment reserve, the aim is to encourage companies in the Balearic Islands to reinvest their profits in the archipelago and involves reducing the tax base for corporate tax, personal income tax deductions or reducing the income tax of non-residents.
In addition, the self-employed who file personal income tax returns will be able to apply a deduction to their tax liability. To obtain these tax benefits, the investment reserves must be used to create jobs, to acquire shares or holdings in Balearic companies, to invest in R&D, to improve and protect the environment, intellectual property or tangible assets (land, buildings, machinery, furniture, etc.).
Companies will be able to reduce their corporate tax base by up to 90 % of the undistributed profit, while for personal income tax, the deduction will be a maximum of 80 % of the average rate for the self-employed entrepreneur for all activity deriving from establishments located in the Balearic Islands. The investment reserves will mean a saving for companies and the self-employed of 201.66 million euros per year, which will no longer be paid to the state and regional administrations.
In the case of the special regime for industrial, agricultural, livestock and fishing companies, corporate tax and non-resident income tax will be reduced and personal income tax deductions will be approved for companies or self-employed workers who sell goods produced in the Balearic Islands.
Thus, 25 % of the quota will be reduced for the creation of new jobs and 10 % for maintaining employment. Through this measure and according to the Government’s calculations, industrial, agricultural, livestock and fishing companies in the Balearic Islands will save 5.99 million euros per year.
The tax regime is the fourth pillar of the special regime for the Balearic Islands, as it is in addition to the compensation from the State obtained in 2019 for energy, passenger and goods transport and investments. The investments, which are channelled through the insularity factor, have been incorporated into the general State budgets this year for the first time and will mean, over five years, an investment of more than 600 million euros for the Balearic Islands.
20 million euros for the first section of the tramway
In addition to the fiscal part of the REIB, the general state budgets will include, as the President of the Government explained, an initial allocation of 20 million euros as the first annual amount to put out to tender the works for the first section of the Palma tramway, which connects Plaça d’Espanya and the airport.
This investment, which will materialise with the signing of an agreement between the Government of the Balearic Islands and the Ministry of Transport, Mobility and the Urban Agenda, will enable work to begin on the first 10.5 kilometres of the route in 2023, followed by section two – the Playa de Palma section – and section three – the Son Espases section. The tramway works between the airport and the city centre are scheduled to be completed in 2026.
This fulfils the State’s commitment to financing an infrastructure that is so necessary to change the mobility model of the city of Palma and of all the islands.