The Fifth Section of the Administrative Litigation Chamber of the High Court of Justice of Madrid has issued a key ruling on taxation in the island’s primary sector, recognizing the right of personal income tax (IRPF) taxpayers to apply the tax allowance for the production of tangible goods under the Economic and Tax Regime of the Canary Islands (REF) to subsidies and public aid received in tax years before the 2018 legislative reform. The ruling (1017/2025) upholds an appeal filed by a taxpayer whose request to amend their 2016 personal income tax return had been rejected by the State Tax Agency (AEAT) and the Madrid Regional Economic-Administrative Tribunal (TEAR).
The Tax Administration argued that including the aid in the base for the 50% tax allowance provided for in Article 26 of Law 19/1994 was not applicable retroactively before Law 8/2018 entered into force.
Clarifying nature of the REF reform
The court’s ruling adopts the position established by the administrative litigation chambers of the High Court of Justice of the Canary Islands, determining that the amendment introduced to Article 26.3 of the REF Law in November 2018 is strictly interpretive and clarifying in nature. The provision specifies that both funds from the Specific Supply Regime (REA) and direct aid to producers under the Community Programme to Support Agricultural Productions in the Canary Islands (POSEI) form part of the income derived from the sale of tangible goods produced in the archipelago.
As the provision was intended to resolve doctrinal discrepancies between administrative bodies and the courts, the chamber concludes that its effects must extend to non-time-barred tax years before 2018. The court stresses that denying retroactive effect to a clarifying provision would violate the principles of legal certainty, legitimate expectations and protection of investment in the primary and fishing sectors.
Impact on the fishing fleet and extractive sector
The judicial ruling consolidates a framework of tax certainty for extraction and processing activities in the Canary Islands. The allowance under Article 26 of the REF directly benefits deep-sea fishing operations that land their catches at Canary Islands ports for handling or processing, placing the tax treatment of operating and EU aid on an equal footing with the direct income from catches.
The ruling overturns the AEAT’s assessments and opens the door for shipowners and professionals in the extractive sector who calculate their income under the direct assessment method to seek refunds of undue payments in their non-time-barred personal income tax returns. The decision halts the Treasury’s restrictive interpretation and safeguards the tax incentive designed to offset the additional costs of the outermost region in the archipelago’s marine and agricultural production chain.
The article Green light for 50% REF tax break for fishing in the Canary Islands was first published on canarymaritime.com.
