The Canary Islands offer a distinctive fiscal environment through the Canary Islands Special Zone (ZEC) and the Economic and Fiscal Regime (REF), which together provide one of the most advantageous business frameworks in Europe. These systems are especially attractive for international companies looking to expand into European, African, or American markets, all while benefiting from substantial tax reductions and logistical advantages.
At EBF Consulting, we have seen firsthand the transformative potential these fiscal systems offer for businesses seeking to establish or grow in the Canary Islands.
Key Advantages
- 4% Corporate Tax Rate: Companies operating under ZEC benefit from one of the lowest corporate tax rates in Europe. Whether you’re in manufacturing, services, or innovation, this can significantly improve your profitability.
- Incentives for Investment and R&D: The REF provides additional tax benefits for businesses involved in research and innovation. This allows companies to reinvest in their growth while minimizing tax liabilities.
- No VAT, But IGIC: The Canary Islands operate under a lower indirect tax system known as IGIC, which is set at 7% compared to Spain’s 21% VAT, further improving cost efficiency for businesses.
- Access to Global Markets: Strategically located for access to Europe, Africa, and the Americas, the Canary Islands are a prime location for logistics, exportation, and service providers.
Case Studies: Success in the Canary Islands
- UK-Based Frozen Fruit Manufacturer: A British company producing frozen fruit products expanded into the Canary Islands by establishing a ZEC entity. This strategic move enabled them to distribute their products efficiently across the archipelago and beyond, taking advantage of the 4% corporate tax rate while tapping into the growing demand for healthy, convenient foods in the islands.
- Wellness and Spa Business for Hotels: A company specializing in wellness centers and spa services for high-end hotels in the Canary Islands utilized the ZEC framework to optimize its expansion. The favorable tax environment allowed them to invest in innovative health and wellness solutions, creating services that enrich the lives of both locals and visitors, while capitalizing on the islands’ growing tourism sector.
- Innovative Photographer: A talented photographer, using cutting-edge technology, chose the Canary Islands as a base to scale his business. With the help of ZEC benefits and access to top-tier equipment and resources, he has been able to expand his business significantly, positioning himself as a leader in his field.
- Tech Startup Expansion: A tech company specializing in AI solutions recently expanded its operations to the Canary Islands, attracted by the 4% corporate tax rate under the ZEC and the generous incentives for R&D. This move not only reduced their operational costs but also provided strategic access to European markets.
- Renewable Energy Leader: A global renewable energy firm relocated part of its operations to the Canary Islands, benefiting from the tax advantages of the ZEC and the logistical benefits of being positioned between Europe and Africa. With the Canary Islands investing in renewable energy, this company saw an opportunity to scale its operations and reduce costs.
- Film Production Hub: Due to the tax breaks under the REF, the Canary Islands have become a hub for international film productions. Major production companies have chosen the islands for large-scale projects, benefiting from a 50-45% tax rebate on production costs. This has contributed to the booming audiovisual sector, creating a new ecosystem of services around the film industry.
Positioning the Canary Islands for Future Growth
The Canary Islands continue to attract companies in technology, renewable energy, tourism, and digital innovation. Government-backed incentives, combined with the region’s strategic location, make it an ideal springboard for companies looking to expand into international markets.
Additional Requirements for Setting Up a ZEC Entity
To establish a ZEC entity, businesses must meet specific job creation and investment criteria:
- In Tenerife and Gran Canaria: Companies must create at least 5 jobs within the first six months of trading and invest a minimum of €100,000 in capital expenditure (fixed assets) within the first two years.
- In the other islands: A minimum of 3 jobs must be created within six months, and an investment of €50,000 is required within the same time period.
At EBF Consulting, we understand the complexities of the ZEC and REF systems, and we are ready to help businesses take full advantage of these opportunities. From company formation to navigating tax regulations, we provide tailored solutions that ensure you maximize your potential in this thriving economic region.