Information About the Canaries
form an archipelago made up by seven main islands,
located in the Atlantic Ocean near the Tropic of Cancer,
near the African coast of Western Sahara. The islands
stretch in an East-West 500 Kms arch. The latitude
of the Canaries is in the subtropical zone, being
the same as that of Orlando, Florida. The climate
of the Canaries, however, is tempered by the surrounding
Islands are an integral part of Spain; this has been
so for more than 500 years, and a huge majority of
Canarians have confirmed their status repeatedly over
time. The language of the Canaries is Spanish (Castilian),
but the accent is more like the Spanish spoken in
form an "Autonomous Community" within the
Kingdom of Spain. The islands have their own Government,
Parliament and Administration, established by the
Statute of Autonomy of the Canary Islands. The Canarian
fiscal and economic system is different from the general
Spanish one, which is in force in the major part of
part of Spain, the Canaries are also part of the European
Union. However, the islands enjoy some exceptions
in the fiscal and economic area.
in the Canary Islands is the euro, as in Spain.
of the Canaries is in Santa Cruz de Tenerife; the
delegation of the Spanish Government in the Canaries
is in Las Palmas de Gran Canaria, with a sub-delegation
in Santa Cruz de Tenerife; the Supreme Court of Justice
of the Canarie is in Las Palmas de Gran Canaria.
Supreme Court of Justice exercises the judicial power.
Appeals against its resolutions are to the Supreme
Court and the Constitutional Court of Spain.
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Special Tax Regime (REF)
mainland tax regulations apply in the Canaries, companies
operating there are also eligible for special tax
incentives (the Special Tax Regime or REF). Key features
of the REF are as follows:
- VAT is not applied in the Canary Islands; instead
there is a specific Sales Tax (IGIC) which has a
general rate of 5%. In addition to increased and
reduced rates of IGIC, there is a zero tax rate
for certain basic need products and services (eg
from duty on capital increases.
use of undistributed profits to reduce the taxable
base provided that the amounts concerned are invested
within three years in certain qualifying fixed assets
or public stock.
tax credits for various types of investment.
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Special Economic Zone (ZEC)
Islands Special Zone has been created within the fiscal
and economic regime of the Canary Islands for the
purpose of encouraging the economic and social development
of the islands and the diversification of their manufacturing
and service sectors.
was initially The Canary Islands Special Zone authorised
by the European Commission in January 2000.
early 2006, the Department of Economic Affairs and
Finance of the Canary Islands Government suggested
the introduction of improvements to the Canary Islands
Economic and Fiscal Regime, including the extension
of the time frame of the low tax zone beyond 2008
of 25 years for companies in the service sector and
50 years for companies operating in the industrial
In addition, a suggestion has been made for solving
the problems related to double taxation on profits.
This modification aims to make the ZEC a real stimulus
for attracting companies with newly-created economic
activity. At present, companies with their head office
in mainland Spain are subject to double taxation on
profits, which makes it difficult for them to set
up in the low tax zone.
the announcement of an extension in December 2006,
the benefits provided by the ZEC will initially be
available until December 31, 2019, although this may
be further extended if the European Commission authorises
intending to carry out manufacturing, commercial or
service activities within the territory of the Canary
Islands may register in the ZEC; financial services
manufacturing, processing, handling and goods distribution
beverages and tobacco;
goods and footwear;
and related products;
publishing, graphic arts and reproduction of recorded
and mechanical equipment;
electronic and optical materials and equipment;
and distributive activities;
bottling and canning
service activities include:
and related activities;
resources and waste disposal;
and fiscal services;
companies registered under the ZEC may be set up in
any part of the Canary Islands.
processing, handling and distributive activities must
be located in certain Designated Areas at:
the island of Grand Canary
- The Port of La Luz and Las Palmas
- Gando Airport
- The Arinaga Industrial Estate
the island of Tenerife:
- The Port of Santa Cruz de Tenerife
- Los Rodeos and Reina Sofía Airports
- The Granadilla Industrial Estate
are Designated Areas on each of the other Canary Islands.
wishing to set up in the ZEC must satisfy a number
of requirements, of which the most important are:
ZEC Company must be newly incorporated;
least one of the persons authorised to manage and
act on behalf of the Company must be resident in
the Canary Islands;
ZEC Company must make an investment of at least
EUR100,000 (EUR50,000 in some locations) in fixed
assets related to the activity within the first
two years subsequent to authorisation;
ZEC Company must employ at least five persons (reduced
to three in some locations) in the ZEC area within
the first six months subsequent to authorisation
and must retain this number of employees, on average,
throughout its lifetime;
ZEC Company must present a description of its activities,
with particular mention of its economic viability,
international focus, contribution to the economic
and social development of the Canary Islands and
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of ZEC Companies
enjoy the following tax benefits:
tax (levied in Spain at 30%) is charged at 4% on
profits derived from ZEC activities. The rates depends
- Net creation of employment;
- The period of inclusion in the Register of ZEC
- Whether the activity is new or pre-existing;
- The type of activity
companies are exempt from Capital Transfer Tax and
Stamp Duty in the following circumstances:
- Purchase of goods and rights for the conduct
of the business activity of the ZEC company
within the geographical area of the ZEC;
- Company operations except liquidation;
- Stamp duty on documents connected with the companys
operations in the geographical area of the ZEC
companies are exempt from Canarian Indirect General
Tax (Canarian Sales Tax) on delivery of goods and
provision of services from one ZEC Company to another,
and on imports.
Double Taxation Treaties and the EU Parent-Subsidiary
Directive: the Canary Islands are an integral part
of the territory of Spain and the European Union.
Therefore ZEC companies may take advantage of Double
Taxation treaties signed by Spain and the EUs
Parent-Subsidiary Directive. ZEC Companies are not
obliged to deduct tax from payments for tangible
assets made by them.
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of a ZEC Company
authorisation and registration are the three steps
required of companies wishing to set up within the
application must be presented together with the description
of the intended activities.
Consortium Board will then decide on the application
and will inform the applicant of its decision within
the space of two months from the date of presentation.
new company must be incorporated by a Notary Public
and must be registered on the proper Registers (this
may be done prior to authorisation being received).
authorisation has been received, the company must
be registered on the Official ZEC Register, which
is managed by the Consortium Board.
are subject to the following fees:
fee to remain on the Official ZEC Register
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