Tax Benefits for Businesses in the Canary Islands: Details and Opportunities

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The Canary Islands, located off the northwestern coast of Africa, are a Spanish territory with a unique tax regime that offers several benefits to businesses.

This regime, known as the "Canary Islands Economic and Fiscal Regime." (REF), was established to promote the economic development of the archipelago and attract foreign investment.

 

In this article, we will take a detailed look at the main facilities under the REF, the requirements for eligibility, and the potential advantages and disadvantages for businesses.

The main facilities of the REF:

  • Corporate Income Tax (IS): Reduced rate to 4% for new companies setting up in the Canary Islands and creating at least 5 jobs.
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  • General Canary Island Tax (IGIC): VAT rate reduced to 7 percent for most goods and services.
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  • Customs duties: exemption or reduction of customs duties for the import of goods destined for the Canary Islands.
  • Hiring incentives: tax relief for hiring new workers.

Eligibility requirements:

  • Businesses must be established in the Canary Islands.
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  • Economic activities must be carried out within Canarian territory.
  • Companies must meet the criteria set by the REF regarding employment, investment and reinvestment of profits.
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Benefits for enterprises:

  • Reducing the tax burden.
  • Increased competitiveness.
  • Access to a market of more than 2 million people.
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  • Opportunity to benefit from a stable economic and political environment.
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Disadvantages for businesses:

  • Complex system of rules and procedures.
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  • Risk of tax audits by Spanish authorities.
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  • Difficulty in finding qualified personnel.
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Are the Canary Islands a tax haven?

The answer to this question is not simple. The REF undoubtedly offers significant tax breaks to businesses, which can translate into significant cost savings.

However, it is also important to consider the eligibility requirements, the complexity of the tax system, and the potential risks of tax audits.

Ultimately, the choice to open a business in the Canary Islands must be carefully considered, taking into account the specifics of one's business and investment goals.

In addition to the above information, it is important to elaborate on the following aspects:

  • The different types of economic activities eligible for the REF.
  • Procedures for obtaining tax benefits.
  • The tax and accounting obligations to which businesses are subject.
  • The economic development opportunities offered by the Canary Islands.

For a comprehensive and customized assessment, we recommend consulting an accountant or consultant experienced in international taxation.

Some useful resources to explore the topic further:

Conclusion:

The Canary Islands offer an advantageous tax regime for businesses that can translate into increased competitiveness and cost savings.

However, it is important to carefully evaluate the requirements, complexity of the system, and potential risks before making a final decision.

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