Gran Canaria in particular, and the Canary Islands in general, own a special Economic and Fiscal Regime (REF) that offers reduced taxation on company profits and on consumer goods as well as access to other incentives to business investment.
The REF is entirely compatible with the Spanish and European regulations.
General Tax Incentives
Canary Islands Special Zone (ZEC).Businesses set up within the ZEC are subject to a reduced level (4%) of company tax. This option is particularly attractive to investors from other countries as no withholding tax applies to repatriation of dividends nor on the payment of interests to their headquarters.
Tax deduction for the production of material assets. This incentive offers a 50% reduction in company tax, applicable to businesses producing agricultural, livestock, fishing and industrial goods.
The Canary Islands Investment Reserve (RIC). With this incentive the tax burden can be reduced by up to 90% of the company’s profits, always provided that certain investments linked to the growth of the company are made.
Deduction for investment in fixed assets. This means a reduction of company tax equivalent to 25% of the amount destined for the acquisition of fixed assets.
Deductions for investments in RD&I and audiovisual productions. Reductions from 45% to 75% in R&D and Technological Innovation, and from 40% to 45% in national and international audiovisual productions.
Customs-free zone. Goods can be stored, transported and handled during an unlimited period of time in a special area without having to pay any type of import duty or tax.
The Canary Island are outside the EU VAT area. Instead we have a similar sales tax called IGIC, with a rate of 6.5%.
IGIC must be only collected in sales to:
- customers based in the Canary Islands.
- private individuals based out of the EU.
- any customers that consume your services/products in Canarian territory.
This blog post is for informational purposes only. Be advised that sales tax rules and laws are subject to change at any time. For specific sales tax advice regarding your business, please contact a professional tax advisor.
Canary Islands Special Zone
Businesses set up within the Canary Island Special Zone (ZEC) are subject to a reduced level (4%) of corporate tax. This option is particularly attractive to investors from other countries as no withholding tax applies to repatriations of dividends nor on the payment of interests to their headquarters.
As part of the Canary Islands Special Zone (ZEC), Gran Canaria offers some serious tax incentives to investors who establish a company based on the island. It’s one of Europe’s most generous tax regimes and a heavyweight option for anyone looking to invest their capital in a tax-efficient manner.
Gran Canaria is also covered by the Canary Islands Economic and Tax Regime, which offers a generous set of tax exemptions for international businesses based on the island. Check this excellent summary of the advantages of setting up in Gran Canaria.
In order to access ZEC advantages, a company needs to meet a few specific requirements and apply to the ZEC authority:
- The company must be a new corporate entity based in the Canary Islands.
- At least one of the directors must reside in the Canary Islands.
- Minimum investment of €100,000 in Gran Canaria in fixed assets within the first two years. This investment can be made in properties in Gran Canaria.
- The company must create 5 full-time jobs in Gran Canaria during the first six months, and maintain this average workforce on an annual basis.
- The company must operate in a long list of permitted sectors or service industries.
Please mind that incorporate a company in the Canary Islands does not give a direct access to ZEC. In order to be listed as a ZEC company, the promoters of the company have to apply to the ZEC Consortium. As they state on their website:
If you want to set up a project under the ZEC regime, you must provide the following documents before the ZEC Consortium:
- An application form for authorization and a report, using the standard model.
- A copy of the ID or passport of the applicant.
- A documentary proof of deposit or guarantee for the amount of the registration fee.
- Professional or business profile of the applicant and the technical training from the staff intended to hire, unless it is described in the report.
- Bank Comfort Letter from the applicant.
- Any other relevant documentation to better understand the scope of the business project.
People at ZEC are usually very welcoming and eager to help. If you want more information on how to become a ZEC entity we strongly recommend to the get in touch with them.