The new Canary Islands Tax Free Zone (ZEC) represents the most innovated fiscal instrument of the Special Tax Regime (REF) because it provides a low tax on the Corporate Tax.  This is also applied for different activities and by the fulfillment of the minimum requirements that consist in jobs creation and investment. The rates are between 1% and 5% with non objective or subjective restriction. It also has other tax incentives, such as exemption in property transfer and stamp duty tax and in Sale Tax (IGIC). The ZEC was created initially until 31st December 2008 and may be extended beyond that date with the authorization of the European Commission..

Tax Advantages for ZEC companies

» Taxation between 1% and 5% of the Corporate Tax.

» Tax exemption in the IGIC (it substitutes the VAT in the Canary Islands) for goods imports carried out by the ZEC companies as well as goods deliveries and services provided by ZEC corporations.

» Exemption in Property Transfer and Stamp Duty Tax related to the purchase of goods and duties, trade deals and stamp duty tax.

» Exemption in Nonresident Tax regarding the profits allocated by ZEC companies to the parent companies and to the interest and other yields obtained by non residents in Spain.

Any Company wishing to set up in the ZEC must satisfy a number of requirements

» It must employ at least five persons in the ZEC area within the first six months subsequent to authorization and must retain this number of employees, on average, throughout its lifetime.

» It must make an investment of at least 100,000 Euros in fixed assets related to the activity within the first two years subsequent to authorization.

» The company must be newly incorporated and based in the Canary Island.

» At least one of the persons authorized to manage and act on behalf of the Company must be resident in the Canary Islands.