The Canary Islands Special Zone (ZEC) is one of the most powerful fiscal instruments available in the European Union. Created within the framework of the Canary Islands Economic and Tax Regime, it allows registered companies to pay 4% corporation tax, compared to the general rate of 25% in mainland Spain.
The ZEC offers a 4% corporation tax rate — 21 percentage points below the general Spanish rate. For a company with €500,000 profit, that means savings of over €100,000 per year.
The Canary Islands Special Zone was created by Law 19/1994 and is authorised by the European Union as State aid compatible with the internal market. Its aim is to promote economic development of the Canary Islands and compensate for the costs of outermost region status (remoteness, insularity and energy dependence).
Entities registered in the ZEC can apply a reduced rate of 4% on the portion of the taxable base corresponding to operations carried out materially and effectively within the ZEC geographic area.
The main advantage. While the general rate in Spain is 25%, ZEC entities pay 4% on the ZEC-generated taxable base.
Supplies of goods and services between ZEC entities are exempt from the Canary Islands General Indirect Tax (IGIC), facilitating trade between companies in the area.
The ZEC admits a wide range of economic activities including technology, industrial, commercial, financial (with restrictions), R&D, consulting and logistics services.
ZEC entities must make a minimum investment in fixed assets within the first two years: €100,000 on Gran Canaria and Tenerife; €50,000 on the smaller islands.
At least 5 jobs must be created within the first six months (3 on smaller islands) and maintained throughout the ZEC regime.
Operations benefiting from the reduced rate must be carried out materially and effectively within the ZEC. Purely instrumental structures are not admitted.
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