Canary Islands Taxation and Companies Law.
The Canary Islands is an archipelago located in the Atlantic ocean, which is formed by seven main islands. The Canary Islands are a part of Spain, and thus also a part of the European Union. The Canary Islands have a largest autonomy, Santa Cruz de Tenerife and Las Palmas de Gran Canaria – their largest cities, share the status of the biggest and chief cities. Spanish is the official language of the Canary Islands.
The Canary Islands have their own local parliament and government, as well as their own economic and fiscal system.
Agricultural activities are well developed on the territory of the Canary Islands, bananas and tobacco are main export categories, the country produces a big variety of its agricultural products. Tourism and construction play an important role in the economy of the Canary Islands, bringing approximately 52% of the GDP.
The Euro is the currency used in the Canary Islands.
All the islands of the archipelago are of volcanic origin. The Teide, volcano located on Tenerife, is the highest point of Spain.
The Canary Islands have rich wildlife, marine life and a big number of diverse plants species. Flora and fauna represent a mix of European and African species, as well as a variety of endemic plants and animals.
The Canary Islands are located in the same latitude as Florida, in the subtropical zone, but the Canaries’ climate is tempered due to being surrounded by the ocean.
Map, Flag and Coat of Arms
Types of Company
Business owners wishing to register a company in the Special Economic Zone (ZEC) of the Canary Islands must follow the following three steps. First of all, they must submit a company registration application together with a detailed description of intended business activities. Once the authorization is received, a registration fee must be paid, and annual fee is payable, in order to keep the company on the official register of ZEC.
A company which provides financial services may not be registered in ZEC. In order to be able to register a company in ZEC, it must be a newly incorporated company, there should be at least one person, resident and authorized in the Canary Islands, who is assigned to act on behalf of the company. A company must make an investment set at a fixed value within the first two years of its operations. A company must employ at least five (sometimes three) persons at all times of its existence and operations in ZEC.
Individuals may be granted fiscal incentives in the Canary Islands. Standard income tax rates are similar to those in Spain, reaching a maximum of 43%.
Tax regulations of Spain are applied on the Canary Islands, however, companies can be eligible to special fiscal treatment and a number of incentives in this jurisdiction. The Special Tax Regime (REF) offers the following advantages: VAT does not exist. Instead, a local sales tax has been introduced which is levied at 12%, 5%, 2% and 0%, depending on the nature of a product or service, therefore many goods are provided at significantly lower prices than on the mainland of Spain. Duty on capital increase does not need to be paid. Tax credits for different investment types are offered.
Companies registered in ZEC benefit from a number of fiscal advantages: they are liable to pay corporation tax at a rate of 4% instead of a standard Spanish corporation tax levied at a rate of 30%, and may be exempted from several other taxes.