With high profile cases of some of the world’s largest companies being scrutinised for what has been described as “Aggressive Tax Structures” it’s easy to understand why the simple mention of a “Tax Incentive” is met with fierce opposition from parts of society.
We’ve all heard the phrases… “Tax Dodgers” “Tax Cheats” “Elitists” etc.
Whilst for some companies those insults are probably valid, generally there’s a complete misunderstanding between Tax Evasion/Avoidance, and Tax Incentives.
Companies, and individuals, who set up corporate entities in jurisdictions where they do not live, or carry out commercial activity are what’s considered Tax Evasion and Avoidance, notice we don’t separate between the two, why? Because they’re at the same end of the scale, only a thin line divides them. Historically, Tax Avoidance/Evaision schemes involve inactive shell companies, not engaged in real business activity, and established for the sole purpose of taking tax revenues away from governments and society as a whole! This clearly creates a Win Lose scenario, and no matter how “Legal” it maybe, there’s clearly a deeper ethical issue at the forefront of peoples minds.
Tax Incentives, on the other hand, are at the complete opposite end of the spectrum. Not only are they legal, but transparent, tax is actually paid, and the incentives are agreed and accepted by governments and commissions. These incentives provide both social and economic development in addition to the obvious benefit to the corporate entity, clearly a Win Win scenario!
It’s exactly this second scenario why The Canary Islands ARE NOT a Tax Haven!!!
The Canary Islands proudly boasts the lowest “Onshore” Corporate Tax Rate in Europe, just 4%. An incentive known as the ZEC, (Zona Especial Canarias) or Canary Special Zone.
Smaller Online Business Owners, Consultants and Coaches take advantage of the RIC, “Reserve Investment in Canary Islands” which allows a 90% tax break on profits reinvested meaning a corporate tax base rate around 3%.
Why do these “Tax Incentives” differentiate the Canaries from “Tax Heavens”? Simply because they’re tied to economic diversity, employment or investment.
The Ethical Argument
It’s easy to argue Tax Incentives in other jurisdictions are unethical, at the very least they’re abused. When you can open a company without actually conducting actual business from that country, have no tangible physical presence in terms of employees or actual services being rendered, it’s understandable why people have an issue with the ethics surrounding offshore. The Canary Islands Tax Incentives, however, are completely unique due to the fact they’re onshore and linked to both social and economic requirements.
ZEC Companies must adhere to the qulifying criteria, which is directly linked to investment and exployment, making it the most trasparent Tax Incentive in the EU, giving certainty to the business owners.
Why does the ZEC exist?
The ZEC exisits due to the logistical position of the Canaary Islands, being so far away from its Mother Country, Spain. The Canaries, unlike Malta and Cyprus, has a special legal status, “Ultra Peripheral” protecting its fiscal incentives.
The main reason the ZEC exists is to create Social and Economic diversity by attracting international business to the islands. During the crisis unemployment rate in Canary Youth exceeded 33% the highest in Europe, yet they have a wealth of bi-lingual, university educated, young talent. When trying to argue Tax Incentives are unfair should remember when an area of your community (In this case the EU) is experiencing difficulty, it’s supported with funding from Tax revenues from member states!!!
By issuing Tax Incentives, enabling a region to self-sustain and develop itself, ultimately means less support is needed from the EU, allowing tax revenues from other members to be put to better use elsewhere!
Every company operating in the Canary Islands is subject to the normal statutory reporting in Spain, in fact, extra attention is paid to those companies receiving the tax benefit to ensure they’re in compliance with the rules agreed, not just by the Canary Government, but the Spanish Government and the European Commission!
This ensures people cannot cheat the system, more importantly it provides additional comfort and security for the owners of companies utilising the benefit. Real Tax Incentives for Real Businesses. No Shell Companies and No need to hide your revenue, just 4% Corporate Tax clean & transparent, plus 0% Whithholding on Dividends when repatriated to a stakeholder based onshore. Find out more…