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Spain: Invest not just into, but also from, the Canary Islands

Antonio Viñuela
César Acosta
The Canary Islands, historically, have a special economic and tax regime (REF), given their status as an outermost region whose uniqueness has been recognised in the Spanish Constitution and by the EU, by which the REF has been authorised.

Furthermore, the Canaries are not classed as a tax haven and, for this reason, the anti-avoidance rules laid down in different legislations do not apply to them, whereas the double tax treaties signed by Spain apply to them in full.

Against this backdrop, Royal Decree-Law 15/2014 amends Law 19/1994 for the purpose of renewing the regime now in force for the period 2015-2020 and – within a framework aimed at continuity, in which all the tax incentives included in this regime are maintained – introduces certain changes, creating new tax credits and certain major technical, qualitative and quantitative improvements which are described below:

  • Canary Islands Special Zone (ZEC): this is a regime of genuinely low taxation which has now been authorised for application through to 2026. It comprises various incentives including, most notably, a reduced corporate income tax (CIT) rate of 4% in addition to certain exemptions from indirect taxation.The reform rectifies certain restrictions which have hitherto prevented the full development of this regime: the list of activities in respect of which the regime can be applied has been lengthened; its territorial scope has been expanded to apply to the archipelago in its entirety; its application has been broadened to include newly-formed companies and branches; the limits to the tax base to which the reduced rate of 4% can be applied have been raised; and the exemption for domestic and international double taxation has been made fully applicable to dividends and capital gains.
  • The Canary Islands Investment Reserve (RIC): a reduction of up to 90% of the CIT tax base, subject to the requirement that an amount equal to the reduction applied be allocated to the making of certain investments in the Canary Islands.
  • Improvement of the deduction for investment in new fixed assets: a deduction of 25% of the investment made in the acquisition of new fixed assets, with an application period of 15 years.
  • Creation of a tax credit for CIT purposes equal to 10% or 15% of the amount invested in the formation, by Canary Islands companies, of subsidiaries or permanent establishments in Morocco, Mauritania, Senegal, Gambia, Guinea-Bissau and Cape Verde, subject to certain requirements; and the creation of another credit for advertising and publicity expenses incurred in the internationalisation of companies.
  • The special tax credits regime applicable in the Canary Islands has been maintained, with rates which are 20 percentage points higher than under the standard credits regime applicable to the rest of Spanish territory.

The Canary Islands are therefore not only an excellent place to invest given their advantageous tax regime and the legal certainty they offer, but are also, thanks to the improvements made to the ZEC, a low taxation territory that is ideal for establishing platforms from which to do business on a worldwide scale. This applies to all or part of a company's business cycles, including the marketing and distribution of production, although certain activities, such as tourist establishments, financial activities and the mere holding of assets, are excluded.

Antonio Viñuela ( and César Acosta (, Canary Islands
Garrigues – Taxand

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