Why Canary Islands are Europe’s #1 Location for Fast Growing Online Companies?
Why Canary Islands?
More famous for its thriving tourism economy, most people are completely unaware that the Canary Islands have some of the most advantageous onshore tax incentives in Europe and is Europe’s lowest Corporate Tax Location, with Corporate Tax Rates as low as 4%, an 80% reduction compared to other EU countries.
The Canary Islands are part of the European Union by default through their relationship with Spain. The Canaries are an Autonomous Community and therefore considered an actual part of Spain, as opposed to being a Spanish Overseas Territory. For this reason the Canaries enjoys onshore tax incentives to compensate for the logistical distance from the rest of the country.
This also means, companies setting up businesses to trade across the EU and to enter the African market, can do so with peace of mind they’ll enjoy the same Financial, Legal and Political securities as anywhere else in Europe.
The Canaries is protected by the European Commission “Ultra Peripheral Outer Most Regions Status” which means they enjoy permanent tax incentives unlike the temporary tax incentives that sovereign nations enjoy, for example, Malta, Cyprus & Luxemburg, which can be taken away at any time.
What are the Canary Islands Tax Benefits?
The “Canary Islands Tax Benefits” are for what is known as the REF, Fiscal and Economic Regime. The benefits have been enhanced every 7 years by direct dialogue with the European Commission and the Spanish Governments Ministry for Tax and Economy (Hacienda).
ZEC Canary Islands Special Zone
ZEC is an incentive aimed at stimulating employment outside of the main traditional industries in the Canaries and has become popular with Tech companies in the APP & Online space, Shipping & Logistics, Audio Visual, Contact Centre’s & EMEA commercial structures.
1. 4% Corporate tax rate for qualifying companies
Europe’s lowest Corporate Tax Rate Incentive.
2. 0% Withholdings when repatriating dividends
ZEC companies enjoy tax free movement of dividends to any beneficiary located in a jurisdiction whereby a Non Double Tax Treaty with Spain is in place.
3. 0% - 7% VAT (IGIC)
The Canaries is outside of the standard European VIES system, therefore when invoicing international companies ZEC entities would not charge the local Vat or Standard European VAT rates, in most cases.
4. 0% VAT when invoicing other ZEC Companies
When ZEC companies purchase or sell both products and services between themselves the local VAT rate (IGIC) of 6.5% is removed from the invoice.
5. 0% Stamp Duty & Transfer Tax
When a ZEC company is acquiring assets relating to the business activity, for example, commercial premises, there is an additional saving of 6% in both Stamp Duty and Transfer Tax.
The qualifying criteria to become a ZEC company are as follows;
1. New Company
The entity must be a newly formed corporate entity in the Canary Islands.
2. Minimum Employment
Create employment positions within the first 6 months of trading on the island you select to operate from. (5 positions In Tenerife & Grand Canaria or 3 positions in the remaining islands).
3. Capital Expenditure
Make a CapEx investment into the company’s development within the first 2 years of trading. (€100k in Tenerife or Gran Canaria, or €50k in the case of the other islands. Please note this is an accounting exercise, whereby all CapEx investment made from revenue are totaled at the end of the 24 month period. These expenses include, software, hardware, IP, furniture, equipment and devices, etc. A more comprehensive list can be acquired from CIC Group.)
4. NACE Activity
The activity of the company must be an authorized ZEC activity from the European Union’s NACE register
5. Resident Director
At least one of the Directors, Administrator in Spanish, must be physically resident in the Canary Islands. In many cases Capital Investment Canaries fulfils this obligation on behalf of its clients.
RIC – Reserve Investment in Canary Islands
The RIC, also known as Canary Islands Reserve, is a fiscal incentive offering a tax break on monies reinvested into the business, assets, and acquisitions, of up to 90% bringing the overall effective corporate tax rate down to as low as 3%
DIC - Deduction on Investments in Canary Islands
The DIC, is mainly reserved for industry or businesses needing to make substantial CapEx investments at the outset. In these cases, the Canary Islands Government offers up to 35% in tax credits of the initial investment made. It’s worth mentioning that many industrial businesses also qualify for local, regional and national subsidies and grants, if which case up to 70% of the initial investments could be regained.
Audio Visual Production
The Canary Islands offer one of the most advantageous Audio Visual Production tax incentives in Europe. Due to the diverse landscapes, and reliable weather combined with leading tax incentives, the Canary Islands was the preferred venue for the following movies in recent years;
· Rambo 5
· Jason Bourne
· Fast & Furious 6
· Solo: A Star Wars Story
· Heart of the Sea
· Clash of the Titans
· Return of the Titans
For productions made in the Canary Islands, and with the certificate of Canaries Audiovisual Work, deduction percentages are 45% for the first million euros and 40% from the second million, capped at €5.4 million euros (so the maximum deduction base is €13,375,000
This location has, the same time zone as the UK, Euro currency, English is widely spoken, plus daily direct flight to many EU cities. There’s a young, educated, bilingual workforce, but perhaps the biggest secret is… It boasts the Lowest Onshore Corporate Tax Rate in Europe, just 4%!!!
World class Connectivity & Infrastructure
The Canary Islands are located 1000km (700 miles) south of Spain and just 90km from the West coast of Africa.
The Canary Islands Government and Island Councils (Cabildos) are very progressive and embrace international business. The Canaries has super high speed fibre optic internet, Data Centre & Super Computer, 8 Airports & of which are International, and with Air connections to more than 178 destinations which includes some, 460 weekly flights to the UK, 350 to Germany and 46 to West Africa.
The islands are constantly developing their motorway infrastructure, Light Rail transport is available in the Metropolitan areas and 26 Commercial Ports.
Lifestyle & Culture
Living & Working in the Canaries is the stereotypical dream lifestyle. Due to the weather the lifestyle is very much an outdoor one. In the main commercial cities of Santa Cruz de Tenerife and Las Palmas de Gran Canaria, you get a feel for just how cosmopolitan and international they really are.
The climate and the culture is a real pull for attracting talent in addition to the educated skilled and multilingual workforce already on the islands thanks to the four universities on the islands.
Despite being hugely popular with Nomads and Digital Entrepreneurs the Canaries are being taken more seriously by corporates, either seeking a base in the EU, Due to the high levels of Healthcare and Education, with more than 28 Hospitals, 103 Medical Centre’s, 39 International schools 870 State Schools and 196 Private schools.
The Canary Islands boasts the largest Carnival in the world “Santa Cruz de Tenerife” and with favourite past times like shopping and al fresco dining, along with the ability to enjoy outdoor sports and activities all year round we can honestly say the Canary Islands really are a “Paradise” even if not a “Fiscal” one!
Advisory & Services
Capital Investment Canaries www.capitalinvestmentcanaries.com our specialists in Onshore EU backed Tax Incentives, IP Positioning and Corporate Structures.
We help our clients use the tax savings to, optimise net profits, fuel growth or become more desirable to investors, and accelerate the equity value in preparation for a higher IPO or exit value.
To arrange a time to speak to one of our Intelligent Structures Experts, contact us on the details below.
Tel UK: +44 (0) 7931 384 374 | Tel EU: +34 674 136 977 | firstname.lastname@example.org