Reinvestment obligations under the Galician Forestry Law

Reinvestment obligations under the Galician Forestry Law

Article 125 of Law 7/2012 on Galicia's forests established the general obligation to reinvest 40 per cent of all income received by community forest associations in the conservation and improvement of the community woodland.

Furthermore, if those revenues come from the exploitation of burnt woodland, the reinvestment obligation increases to 100%, unless the burnt plantation was covered by insurance against fire risk, in which case the percentage to be reinvested would again be 40%.

The resulting amount must first be invested in the drafting of the management plan. Once the management plan has been drafted, the remainder of the amount to be reinvested may be allocated to the execution of the works planned in that plan, as well as to extraordinary works that were not planned but which it was necessary to carry out and which have the approval of the Forestry Administration.

Similarly, all expenditure incurred by the community for technical forest management services and advisory services, such as tax or labour, may also be used to reduce the reinvestment commitment, with the aim that this measure encourages the professionalisation of the management of the community woodlands.

Finally, among the expenses that could be included in the reinvestment category are those related to boundary demarcation.

Until the Forest Law of Galicia came into force in 2012, it was the responsibility of the department competent in forestry matters to carry out the demarcations of the community woodlands which, owing to a flawed classification process at the time, contain numerous errors.

The difficulty and complexity of carrying out boundary demarcations meant that few could be completed. Despite this difficulty (in many cases an impossibility) to finish the demarcation, the wording of Article 125 of Law 7/2012 on Galicia's forests imposes on the community forests the obligation to do so.

The possibility is envisaged that a lower percentage may be reinvested in the event that the works specified in the planning instrument have a total cost lower than the percentage of reinvestment that corresponds to the income. In this case, the reinvestment quotas would be adjusted to the expenditure framework of the special plan of the planning instrument, a framework that must cover the nine years following the request for reduction. Therefore, if a planning instrument is nearing its expiry, it would be necessary to project works to cover that nine-year period.

As for the deadline for applying the reinvestment obligation, these must be carried out in the same financial year or in the following four, aligning this deadline precisely with that of corporation tax, so that the same expenditure can be used to fulfil both commitments.

Furthermore, there is the possibility of requesting an extension of the deadline if necessary, as provided for in Article 125.5 of the Galician Forestry Law.

This multi-year investment plan must first be approved by the community's General Assembly and then by the Forestry Administration.

During the first half of each year, it is necessary to report both the commitment undertaken in the previous year, based on the income received, and the amounts reinvested during that same year. Failure to do so will mean that the community cannot benefit from public grants until it rectifies the situation.

According to that same Article 125 of the Forestry Law, the surplus revenues, once the corresponding quota has been applied, may be invested, in whole or in part:

1. In the acquisition of woodlands, which will be qualified by the respective provincial juries as community woodlands;
2. In the enhancement of the community woodland from a social, heritage, cultural and environmental point of view;
3. In works or community services with criteria for proportional distribution among the various locations; and/or
4. In the distribution, whether total or partial, into equal shares among all co-owners. In the event of compulsory expropriation, this distribution, total or partial, of the amount of the fair price shall be authorised by the Forestry Administration.