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Z.E.C. Zone Canary Islands
(2003-05-07 by www.immo7.com)
WHAT IS THE CANARY ISLANDS SPECIAL ZONE?
The Canary Islands Special Zone is a low taxation scheme
created within the
framework of the Canary Islands Economic
and Fiscal Regime (REF) for the
purpose of encouraging
the economic and social development of the Canary
Islands and the diversification of their productive structure.
The ZEC
was authorized by the European Commission in January 2000. Following the terms
and conditions of such authorization, the Spanish government adapted the aspects
related to the ZEC contained in the regulations governing the Canary Islands Economic
and Fiscal Regime.
Initially, the ZEC will be in force until 31 December
2008. This period can be extended subject to the authorization of the European
Commission. The registration of companies in the Official ZEC Register (ROEZEC)
will end in December 2006, unless otherwise decided by the European Commission.
WHAT ARE THE REQUIREMENTS TO BECOME A ZEC ENTITY?
It must be a newly constituted entity with domicile and effective office
within the ZEC territory. One of the managers must be resident in the Canary Islands.
It must make an investment of at least 100,000 (16,638,600 ptas.) in
fixed assets related to the activity within the first two years subsequent to
authorization.
It must create at least 5 jobs within six months from the
date it receives the authorization to establish itself as a ZEC Entity, and maintain
an average of 5 jobs during the time it is registered as a ZEC Entity.
WHERE MAY A ZEC ENTITY BE ESTABLISHED?
The ZEC extends
over the whole Canarian territory with the following specifications:
Those
companies whose corporate purpose consists of service activities may be established
anywhere within the Canarian territory.
Those companies whose corporate
purpose is the production, transformation, handling or commercialization of goods
may be established only within certain areas specified for that purpose.
THE TAX BENEFITS OF THE ZEC
CORPORATE INCOME TAX
ZEC Entities are subject to the Corporate Income Tax in force in Spain at reduced
rates ranging from 1% to 5% depending on:
Net job creation.
Date
of registration in the Official ZEC Register.
Whether their activity is
new or pre-existing.
Whether their activity is widely implemented in the
Canary Islands.
The general tax rate of the Corporate Income Tax in Spain
is 35%, or 30% in the case of Small and Medium-sized Enterprises (SME).
TAX RATE SCALE
In order to determine the tax rate applicable
to a ZEC Entity, the period from the registration of the ZEC Entity to the end
of the validity of the ZEC shall be divided into three stages. The length of these
stages will vary depending on the year in which the ZEC Entity is registered.
The applicable tax rates shall be levied on the taxable amount arising
from operations materially and effectively carried out within the ZEC territory.
Considering the above-mentioned stages and the net job creation of a ZEC
Entity, the tax rates will be as follows:
GENERAL TAXATION SCHEME
Net Job Creation 1st STAGE 2nd STAGE 3rd STAGE
Between 5 and 8 workers
1,0% 2,5% 5,0%
Over 8 and up to 12 1,0% 2,25% 4,5%
Over 12 and up
to 20 1,0% 2,0% 4,0%
Over 20 1,0% 1,75% 3,5%
If the activity of
a ZEC Entity has been carried out previously with a different ownership, and the
pre-existing workforce is retained, the tax rates will be established according
to the relative increase in the workforce.
ENTITIES WITH A PRE-EXISTING
ACTIVITY
Net Job Creation 1st STAGE 2nd STAGE 3rd STAGE
Over 50%
1,0% 2,5% 5,0%
Between 25% and 50% 2,5% 3,5% 5,0%
Less than 25%
3,5% 4,5% 5,0%
The special tax rates (between 1% and 5%) shall be applied
to a maximum amount of the tax base which will vary according to the number of
jobs created by the ZEC Entity and its type of activity.
Maximum amounts
of the tax base at which ZEC entities will benefit from the special tax rates
Net Job Creation Industrial Activ. Services Other Services(2)
Between
5 and 8 employees 1.800.000 1.500.000 1.125.000
Over 8 and up to
12 employees 2.400.000 2.000.000 1.500.000
Over 12 and up to 20 employees
3.600.000 3.000.000 2.250.000
Over 20 and up to 50 employees 9.200.000
8.000.000 6.000.000
Over 50 and up to 100 employees 21.600.000
18.000.000 13.500.000
Over 100 employees 120.000.000 100.000.000
75.000.000
(2) OTHER SERVICES include the following NACE activities:
wholesale trade and commission trade, except of motor vehicles and motorcycles;
activities of travel agencies and tour operators; tourist assistance activities
n.e.c.; legal, accounting, book-keeping and auditing activities; tax consultancy;
market research and public opinion polling; business and management consultancy;
holdings, and advertising and public relations services.
GENERAL INDIRECT
TAX IN THE CANARY ISLANDS (IGIC)
The IGIC is the Canarian Indirect Tax
which is levied on the end product, substituting Value Added Tax applied in the
EU. Its nature is similar to that of VAT, although with important differences
such as lower tax rates. The general IGIC rate is 5%.
As a general
rule, ZEC Entities are exempt from IGIC when selling goods and delivering services
to other ZEC Entities, as well as when importing goods. | 
Lanzarote 
