What is the Canary Islands Special Zone?
The Canary Islands Special Zone (hereinafter ZEC) is a tax incentive of the Economic and Fiscal Regime (REF) in the Canary Islands. Its aim is to diversify regional productive fabric, and to create value-added work through the companies that have chosen to set their sights in the Canary Islands. Thus, thanks to its attractive low taxation regime, companies that set up business in the Canaries can benefit from a 4% reduced corporate tax rate.
Who can incorporate under the low taxation regime of the ZEC? What are the conditions to benefit from the tax advantages of this incentive?
The most interesting aspect for a company or an investor is to know what conditions must be met to benefit from the tax advantages of the ZEC. First of all, any newly-created entity or branch with a domicile for tax purposes or effective headquarters in the Canaries can benefit from the advantages of the regime. Then, at least one of the administrators of the company must live in the archipelago. The company must also meet investment and job creation conditions. For instance, to set up a business in Tenerife or in Gran Canaria, the company must invest 100,000 euros, or 50,000 euros in the case of La Gomera, El Hierro, Lanzarote and Fuerteventura. The investment must be made in fixed assets, within the first two years of the registration process in the Official Entity Registry of the ZEC (ROEZEC). As far as the job creation is concerned, these companies must create five jobs for the islands of Tenerife and Gran Canaria, and three jobs for La Gomera, El Hierro, Lanzarote and Fuerteventura, within the first six months of their registration and they must maintain these numbers throughout the time they benefit from the tax advantages. Furthermore, the companies’ corporate purpose must be included within the permitted activities list.
Tax advantages of the ZEC companies
Overall, in addition to the possibility of paying a special tax rate of 4% on Corporate Tax, the ZEC regime provides other additional tax benefits such as: the exemption of the Tax on Capital Transfers and Documented Legal Acts, advantages regarding the Canary Islands General Indirect Tax (IGIC), the exemption in the delivery of goods and services and the import of goods made by ZEC companies. In addition to the uniqueness of the Canarian tax system, companies can also combine this incentive with others of the REF such as: the Free Zone, the Reserve for Investments (RIC) and Investment Deduction.