Does 4 % corporate tax sound alluring?
No – we do not talk about any “shady” jurisdiction in South America or far east. This the current situation on the Canary Islands – the well-known tourist paradise in the Atlantic with a stable government (a part of Spain), within the European Union and using Euro (€ ) as currency. As a result of negotiations between local authorities within the islands, central government in Spain and the EU, the Canaries have been approved as a “low tax zone” (ZEC – Zona Especial Canaria).
The “beauty” of being incorporated within ZEC, is that it will be no withholding of tax in Spain for EU or non EU companies on distribution of dividends , interests, fees, royalties and other capital gains. This is due to the fact ZEC corporations can apply the International Double Taxation Agreements signed by Spain, as well as the European Union parent-subsidiary Directive. In short terms this means that the net profit of a ZEC company will not be subjected to additional corporate taxation within the EU (EEA).
Another advantage is also that the regulations are not set to “hit” the big companies only. The requirements for incorporating as a ZEC entity are quite modest. Minimum investments to be made are 100.000 € in Gran Canaria and Tenerife, and 50.000 € in the other islands. It is also necessary to create some jobs on the island – minimum 5 in GC and Tenerife and minimum 3 in the others.
Not all types of businesses can benefit from the system, but a lot. All from medicinal and pharmaceutical and different types of manufacturing to call centers, consultancy and security. Just question us if you want to know if “your business” is on the list.
To be accepted as a ZEC entity, there must be made an application for authorization prior to registration. Warning: Do not incorporate first.
To file the application the authorities has set a fee of 850 €. This is made as a deposit, and will be used to cover the registration costs if the ZEC authorization is granted.
From the time the ZEC project is authorized, the business should be started up within 18 + 9 months.
If an applicant has started the process, got the authorization and then reconsider and change plans, the process can be stopped without costs and justification. Being authorized as a ZEC entity is a right – not an obligation.
If more information is needed or assistance necessary for filing an application, please take contact.