While some use the TAX EXILE, leaving the country, in the Canary Islands there is an Economic and Fiscal Regime (REF) which offers financial and tax instruments, with extraordinary incentives for investment and reinvestment, with taxes that are also the lowest in all of Europe, and in an environment of total legal certainty.
This is what is known as “The Canarian Singularity,” an ecosystem articulated with unique tools where it is only necessary to apply common sense, without needing to resort to tax engineering, from the most absolute legality, within the country and with the best advantages of the entire continent.
What are those tools?
- The Lowest Taxation in Europe, Legal and Safe: We are not talking about shortcuts, but about an Economic and Fiscal Regime (REF) validated by the European Union, which includes tools such as the ZEC (Canary Islands Special Zone) with a 4% tax rate; the RIC (Reserve for Investments in the Canary Islands), a reduction of up to 90% of the taxable base of Corporate Income Tax; and leading deductions in R&D&I. It is the basis for a real and lasting competitive advantage, without surprises, which also allows you to lower your tax bill and apply those reductions to the price of your products.
- A Real Innovation Ecosystem: The Canary Islands are often perceived from the outside as synonym of sun and beaches, and while tourism and its hotel infrastructure are certainly fantastic, the islands offer much more. They are also a natural laboratory, a hub for emerging talent, with cutting-edge infrastructure and exceptional connectivity. They are a meeting point for inquisitive minds, from tech startups to audiovisual production companies and research centers. Creativity is palpable, collaboration is encouraged, and technology is driven by truly disruptive projects.
- Quality of Life Without Sacrifices: What value do you place on working by the sea, enjoying a mild climate year-round, having access to top-tier services, and a direct connection to Europe, Africa, and the Americas? The unique character of the Canary Islands allows you to integrate your professional and personal life in a way that other regions simply cannot offer. It’s a lifestyle that boosts your productivity and well-being. Pure quality of life.
- Rootedness and Purpose: In TODO ES SINGULAR We believe in building, not fleeing. We believe in development with impact. The Canary Islands offer you the opportunity to be part of a community, to contribute to growth that goes beyond your results. Here, your company not only benefits from a unique tax framework; it is also enriched by a diverse and welcoming human and cultural environment.
Why the Canary Islands?
The Canary Islands is recognized as an OUTER PERIPHERAL ZONE, with legal certainty backed by the Spanish Constitution, the Statute of Autonomy and a regulatory framework adapted to the EU, the OECD and the G20, compatible with anti-corruption measures and international treaties.
Thanks to this consideration, and its insularity, it enjoys extraordinary benefits compared to SPANISH TAX SYSTEM in order to boost its productivity and competitiveness due to its remoteness. The result is a unique and privileged position compared to other territories.
What are its main financial, tax, and legal benefits?
The main tools of the REF:
- Corporate Income Tax: 4% for the Canary Islands Special Zone (ZEC), the lowest within Europe.
- Canary Islands Investment Reserve (RIC): It allows deducting up to 90% of undistributed profits (80% in personal income tax) for reinvestment, functioning as self-financing.
- Investment Deductions (DEC): Upper limits that are 80% higher than the General Regime, and a difference of 20 to 45 percentage points.
- R&D&I: Higher levels of tax deductions: For example, the deduction for technological innovation is 45% compared to 12% on the mainland, and the costs of an R&D center are increased in the Canary Islands by between 35% and 55%. A reduction of up to 100% is possible in certain cases.
- Multiple Exemptions: Among others, in the creation of companies, capital increase and acquisition of investment goods.
- IGIC (Canary Islands General Indirect Tax): General rate of 7%, compared to the 21% VAT rate in mainland Spain.
- Free Trade Zones: Advantages for exporting, importing and processing goods, with exemption from indirect taxes.
- Additional Deductions: For international promotion and investments (also applicable in West Africa).
- Subsidized Transport and Extraordinary Incentives for audiovisual production.
What are the key instruments?
Canary Islands Special Zone (ZEC):
Authorized by the European Commission since 2000, it is a low-tax zone with European control, without connotations of a tax haven.
• Lower taxation: A 4% Corporate Tax rate, which contrasts with the 25% in mainland Spain and the European average of 17.5%. This 4% remains in effect despite the 15% minimum Corporate Tax rate (PILLAR2) of the EU for multinationals, effective from January 2024.
• Accepted activities: Broad, including all industrial, commercial, or service sectors. Recently, commercial trading was incorporated, allowing a 4% tax on profits from wholesale operations (including triangular ones) if management is centralized in the Canary Islands.
• Requirements: Be a newly created entity or branch with its registered office and effective management headquarters in the Canary Islands, have a resident administrator, an authorized corporate purpose, create and maintain 5 jobs (Tenerife and Gran Canaria) or 3 (other islands), and invest a minimum of €100,000 (Tenerife and Gran Canaria) or €50,000 (other islands) in fixed assets. There are exceptions to the investment requirement for higher employment or innovative nature.
• Additional benefits: Exemption from taxation on dividends leaving the Canary Islands, exemption on company formation and expansion, and no IGIC (Canary Islands General Indirect Tax) settlement between ZEC (Canary Islands Special Zone) companies on the import or delivery of goods. Also, exemption from Property Transfer Tax and compatibility with other REF (Special Economic Regime) tax incentives.
The Canary Islands Investment Reserve (RIC):
Tax incentive that allows a reduction of up to 90% of the taxable base in Corporate Income Tax and up to 80% of the full amount in Personal Income Tax, for undistributed profits that are allocated to reinvestment.
- Purpose: It is a unique and extraordinary source of financing for self-financing or reinvestment in other companies or assets in the Canary Islands, strengthening net worth.
- Applicable to: Companies subject to Corporate Income Tax with a permanent establishment, individuals subject to Personal Income Tax (direct estimation) and non-resident entities with a permanent establishment in the Canary Islands.
- Materialization requirements: The investment must be made in the company itself or in other entities in the Canary Islands, with assets located, received and used in the islands and be explicitly stated in the balance sheets.
- Investment areas: Creation or expansion of establishments, diversification, process transformation, subscription of shares (including ZEC companies), productive business investment, land, job creation (€36,000/person/year), financial instruments, R&D&I, aircraft, ships and transport networks.
- Deadlines: Maximum 3 years to materialize the investment from the time the payment effect occurs, and the goods must remain in the entity for 5 years.
What are the best investment sectors?
The Canary Islands are positioning themselves as an attractive financial and tax hub and industrial destination for companies, especially in key sectors such as R&D&I, biotechnology, biomedicine and health, ICT and tourism innovation, new technologies, audiovisual, internet platforms, services and e-commerce.
What other advantages and infrastructure are offered?
• Excellent connectivity: 8 airports (6 international) and a high concentration of submarine fiber optic cables and satellites.
• Infrastructure: Good Road network and commercial ports.
• Human capital: Young and qualified population, salaries below the European average, and a destination for digital nomads.
• Education and Research: 5 universities, 400 vocational training courses and world-class scientific facilities (Astrophysics, Marine Research, Health, Clean Energy).
• Quality of life: Cosmopolitan environment, a benchmark in tourism, astrophysics and marine sciences, with a constant climate with an average of 22 degrees and 4,800 hours of natural light per year.
If you were a content creator and knew that you could pay 4% tax within your country, without the obstacles when you move abroad, and without arguments or negative considerations from the tax authorities or your audience, you would probably rush to settle there.
Whether you are a wealthy individual, a foreign or Spanish investor, or a prominent brand, you can consider the Canary Islands as the ideal bridge for your business in Europe, Africa, or America, with a tax system that allows for enormous savings.
If you are a technology entrepreneur, an audiovisual producer, or simply someone looking for a place where your vision can set roots and flourish without the constraints of the conventional, the Canarian Singularity awaits you.
The Canary Islands are not a destination to escape to; they are a destination where one builds, sets roots, transforms, and leads, even though not everything that should be known is known, and even though many Canarians are unaware of many of its virtues.
SINGULAR offers services to help you benefit from “The Canarian Singularity”. Write to hola@todoessingular.com
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