ZEC – Canary Islands Fiscal Economic System

Economy of choice at your fingertips.  The reasons for your business growth are our particular challenge.

ZEC - Canary Islands Fiscal Economic System

The Canary Islands Fiscal Economic System (REF), aimed at promoting the economic and social development of the archipelago, has traditionally been differentiated from that in force in the rest of the national territory, since the Catholic Monarchs established the first tax exemptions up until 1852 when the law of Francos Ports of Bravo Murillo was approved incorporating tax exemptions to the import of products.
Subsequently, Law 30/1972 on the Canary Islands Economic Tax Regime consolidated it with legal rank, with Law 20/1991 harmonising tax aspects with the EU, followed by Law 19/1994 regulating economic measures, specialities in direct taxation and the Canary Islands Special Zone (ZEC).
This specific system is recognised and guaranteed, both in the Constitution and in the Statute of Autonomy, at the internal state level, and in the Treaty on the Functioning of the European Union (TFEU) at the European level.
The Autonomous Community of the Canary Islands enjoys a special economic-tax regime, proper to its historical and constitutionally recognised heritage, based on the commercial freedom to import and export, the non-application of monopolies and customs and tax exemptions on consumption. This regime incorporates into its content the principles and rules applicable as a consequence of the recognition of the Canary Islands as an ultra peripheral region of the European Union (art. 349 of the Treaty on the Functioning of the European Union).

This firm specialises in the so-called ZEC, the Canary Islands Special Zone, a low-tax area whose purpose is to promote the economic and social development of the archipelago and to diversify its economic structure, so that it is open to companies operating only in certain non-mature sectors in the Islands, which are authorised and registered in a special register. On this aspect, this firm will provide all the advice needed to successfully join this regime and enjoy all the tax benefits in force in the Islands. The ZEC measures provide for tax advantages in the form of a reduction in the IS tax rate, tax exemption on dividends and interest paid, certain exemptions from the Transfer Tax and Documented Legal Acts (ITPAJD) and certain exemptions from the Canary Islands Indirect General Tax (IGIC).

Therefore, any company wishing to join and join the ZEC, this office will provide all the necessary advice to join this regime. Similarly, and in relation to the authorisation procedure, our team has the service of drawing up the mandatory descriptive report of economic activities together with the rest of the required documentation, an extremely decisive aspect for registration in the ROEZEC.


With previous character, we have to emphasize that all those entities and branches that intend to develop an industrial, commercial or services activity, and under the protection of the activities allowed by the ZEC, will enjoy the fiscal advantages that exist in the Canary Islands:

Corporate Tax

Entities intending to be registered in the ROEZEC and to be ZEC entities will be subject to the Corporate Tax in force in Spanish territory, at a tax rate of 4%.
This reduced rate will be conditioned to the creation of employment and will be applied to some limits of taxable base according to the aforementioned criterion. If you would like more information on this interesting tax benefit, do not hesitate to contact BOSCHMORERA Abogados.

Income Tax Exemption (IRNR)

- Dividends distributed by ZEC subsidiaries to their parent companies resident in another country.
- Interest and other income obtained from the transfer of own capital
- Capital gains derived from movable property obtained without the mediation of a permanent establishment.

In all three cases, they will be exempt from withholding. However, this exemption applies to income obtained by residents in any state when such income is paid by a ZEC entity and comes from operations effectively carried out within the scope of the ZEC.
This exemption shall not apply if the income is obtained from countries or territories with which there is no effective exchange of tax information or when the parent company has its tax residence in a territory that is a "tax haven" or without it, the exchange of tax information is not effective.

Tax on Patrimonial Transmissions and Documented Legal Acts (ITP-AJD)

Those entities that are established in the Canary Islands will enjoy other tax advantages, see the case of the Transfer Tax and Documented Legal Acts.
- The acquisition of goods and rights intended for the development of the activity of the ZEC Entity within the geographical scope of the ZEC.
- Mercantile operations carried out by ZEC entities, except for their dissolution.
- Documented Legal Acts linked to the operations carried out by said entities within the geographical scope of the ZEC.

Canary Islands General Indirect Tax IGIC

- Under the ZEC system, goods and services supplied by ZEC entities will be exempt from taxation by the IGIC - Canary Islands General Indirect Tax.
- Similarly, imports of goods carried out by these entities will be exempt from IGIC.

Compatibility with other REF tax incentives

They should bear in mind in this section that it will be necessary to take into account the limit of Community legislation on the accumulation of aid and under certain conditions, the tax advantages of the ZEC are compatible with other tax incentives of the REF such as the RIC (Reserve for Investments), the Deduction for Investments and the Free Zones.

2-What does the ZEC (Canary Islands Special Zone) consist of?

As mentioned at the beginning of this subject, the ZEC is a low tax investment platform, legally envisaged in Spain and in the EU, to promote the Canary Islands, with the aim of strengthening and developing the socio-economic fabric of the Islands, and the diversification of the Canary Islands economy.
With regard to this low tax zone, we can highlight the following improvements achieved over the years:
- The generalisation of its territorial scope to the whole Archipelago.
- The extension of its subjective scope, by extending to the branches.
-The extension of the limits of the taxable base, related to the creation of employment, in order to apply the special tax rate in the Corporate Tax.
- The incorporation of new permitted activities provided for into existing activities that are likewise maintained.
- The elimination of the restriction on the application of the deduction for internal double taxation of dividends corresponding to shareholdings in Canary Islands Special Zone entities from profits which have been taxed in the aforementioned tax at the reduced rate of 4%.
- The extension of the period of validity, maintaining the time horizon with a period of registration in the Official Register of Canary Islands Special Zone Entities, which on this occasion ends in 2020, and a second period of enjoyment of the scheme by those beneficiaries registered in the former, which will extend until 2026.

3.- Steps to constitute a ZEC entity

All investors and legal entities wishing to establish themselves in the Canary Islands and which form part of the ZEC must have prior authorisation from the Consortium Board of the ZEC, in order to enjoy the advantages established in this system.
At BOSCHMORERA Abogados we offer you the possibility of forming part of the ZEC, obtaining all the tax advantages established in this special tax regime.
The constitution of the company and the administrative body is an essential aspect for them to be able to take advantage of this regime. From BOSCHMORERA Abogados we will help you to make all the procedures a real legal tool indisputable when applying for registration in the ROEZEC.
Without prejudice to the procedures to be carried out for the constitution of a company, these must be in accordance and form a material unit together with:
- Application for authorization prior to registration
- Descriptive memory of the economic activities to develop together with other documents that must be contributed.
In both cases, BOSCHMORERA Abogados will provide all the necessary documentation and technical advice in this regard.
After the presentation of the required documentation, the Governing Council has TWO MONTHS to grant prior authorization and since then you can register in the ROEZEC after providing the documentation that this legal office will indicate.

4.- What can the Canary Islands do for you?

You should bear in mind that the ZEC is a fiscal tool which, due to its purpose, tries to help those entities that intend to establish themselves effectively in the Canary Islands and carry out "real economy" in the Canary Islands, that is, by and for the Canary Islands.
There are currently 572 companies or ZEC entities registered which, as a result of the last report of the ZEC, have generated a figure of almost 6,000 employees in the Canary Islands and with a foreign investment in 2017 of around 30 million euros in benefit of the Canary archipelago. By way of illustration, in 2017, 136 companies were authorised to carry out trade, industry and services activities, although 68% of the ZEC entities are still foreign, that is to say, international.
Our clients should bear in mind that the Islands offer eight airports, six of which are international. Similarly, 500 flights with United Kingdom, 400 with Germany and more than 1,800 with the rest of Spanish territory for the 16 million tourists and more than two million residents throughout the Canary archipelago.
As if that were not enough, the Canary Islands have 26 commercial ports with an approximate traffic of almost 35 million tons of goods and 7.4 million passengers.
It should not be forgotten that the Canary Islands have an intercontinental fibre optic connection, given the 50 satellites and the presence of key telephone operators with a presence in all the Islands, offering the possibility of operating in the best possible framework in a paradisiacal place and in Europe.
All the above figures have been obtained in the ZEC's last Annual Report for 2017.

Download here the explanatory leaflet

Asset Management
The strategy of good outsourcing of services and projects involves a relationship of trust and specialization in specific sectors