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

Le Canary Islands, with their mild climate, breathtaking landscapes and favorable tax regime, are an increasingly popular destination for entrepreneurs seeking investment opportunities or wishing to relocate to a paradisiacal location. In this article, we will explore the tax breaks offered to businesses operating in the Canarian archipelago.

1. Economic and Fiscal Regime (REF) of the Canary Islands.

The Canary Islands Economic and Fiscal Regime (REF) provides a series of tax breaks, incentives and deductions aimed at the creation and development of business activities in the Canary Islands territory. The main objective is the diversification of the Canarian economy and the consequent creation of jobs¹.

2. Taxes and Tax Rates for Businesses.

The Canary Islands offer significant advantages for businesses:

• Canary Indirect General Tax (IGIC): IGIC is the local equivalent of VAT. The IGIC rate stands at 7 percent for domestic transactions. This reduced rate is an incentive for companies operating in the archipelago.

• Zona Especial Canaria (ZEC): The ZEC is a special economic zone that offers even more advantageous tax conditions. Businesses registered in the ZEC can benefit fromfull exemption from IGIC and other taxes for a period of 10 years².

• Canary Investment Reserve (RIC): The RIC allows businesses to deduct up to 90 percent of the profit made. This incentive allows for a wide range of new investments, including the purchase of equipment, construction and renovation of buildings, and other investments aimed at business development².

3. Incentives for New Freelancers.

As of January 1, 2024, a zero quota was introduced for new self-employed professionals registered in the Canary Islands. This means that self-employed professionals will not have to pay any tax for an initial period. This incentive aims to support the archipelago's more than 139,000 entrepreneurs³.

4. Creating Jobs and Investing

To obtain a reduction in the ZEC rate, enterprises must meet two basic requirements:

1. Create at least five jobs in the first year of operation.
2. Invest a minimum of 100,000 euros in physical and tangible assets in the Canary Islands².

Conclusion

The Canary Islands' tax regime provides a business-friendly environment, incentivizing investment and economic development. Before making major decisions, it is always advisable to consult an experienced tax advisor to evaluate options and plan appropriately. 🌴💼🏢