Decision guide · Canary Islands taxation
Canary Islands Special Zone (ZEC): requirements, 4% rate and obligations
ZEC may reduce Spanish corporate income tax to 4% on the portion of the tax base linked to operations materially and effectively carried out in the Canary Islands. It is not automatic: prior authorisation, an eligible activity, local substance and ongoing compliance are required.
The 4% rate requires real substance, not only a Canary Islands address
The decision starts with the facts of the business. The regime may fit where a project creates genuine activity from the Canary Islands and can evidence compliance throughout the benefit period.
4% special rate
It applies to the portion of the tax base attributable to operations materially and effectively carried out in the ZEC area, subject to statutory limits.
Activity and resources in the islands
The activity must be listed in the law and carried out with management, organisation and resources consistent with the authorised business plan.
Authorisation before ZEC status
Registration requires prior Consorcio authorisation and a plan demonstrating solvency, viability, international competitiveness and a contribution to the Canary Islands.
ZEC requirements: legal rule and practical evidence
This table summarises the general minimums in article 31 of Law 19/1994. Specific facts and statutory exceptions must be reviewed before committing to investment or hiring.
| Criterion | General rule | Evidence to prepare |
|---|---|---|
| Entity | A newly created legal entity or branch registered in the Official ZEC Registry. | Legal form, shareholders, activity and incorporation timetable. |
| Office and management | Registered office and effective place of management in the Canary Islands. | Where decisions, contracts, personnel, resources and governance actually sit. |
| Director | At least one director, or the legal representative of a branch, must reside in the Canary Islands. | Residence, actual functions and consistency with effective management. |
| Activity | The corporate purpose must include eligible activities carried out in the ZEC area. | Exact activity, processes, customers, resources and any operations outside the regime. |
| Investment | Within two years: €100,000 in Tenerife or Gran Canaria and €50,000 on the other islands, unless an exceptional employment-based authorisation applies. | Necessary operating assets, location, use, funding, retention and dates. |
| Employment | Within six months: at least 5 jobs in Tenerife or Gran Canaria and 3 on the other islands, maintained during the regime. | Previous workforce, net job creation, roles, registrations, cost and annual average. |
| Business plan | It must demonstrate solvency, viability, international competitiveness and a contribution to Canary Islands development. | Business model, forecast, market, investment, jobs, operations and supporting evidence. |
How a ZEC establishment is authorised
Sequence matters: validate the fit, prepare the binding plan and seek authorisation before registration and execution. Uncoordinated incorporation or investment can create avoidable cost and delay.
- Assessment
Activity, owners, customers, resources, investment, jobs and the location of operations. - Business plan
Operating model, viability, timetable, substance, forecasts and contribution to the islands. - Authorisation
Application to the ZEC Consorcio and responses to any requests for clarification. - Implementation
Incorporation, registration, investment, hiring, separate accounting and periodic controls.
Obligations and limits after registration
Authorisation does not automatically place all company profit at 4%. Operations must remain within the authorised scope and be supportable with records.
- Apply 4% only to the tax base attributable to effective and material Canary Islands operations.
- Maintain investment, employment, activity and effective management under the legal requirements and business plan.
- Identify ZEC operations in the accounts and separate other activities or branches where required.
- Monitor tax-base limits linked to net job creation and EU State-aid rules.
- Notify and obtain approval for material changes before departing from the authorised project.
- Retain contracts, invoices, ledgers, evidence of resources and decision trails.
Checklist before committing to the structure
Any uncertain answer should be resolved before filing the application or committing to investment.
- Is the precise activity eligible and genuinely deliverable from the Canary Islands?
- Who will manage the company, and where will decisions be made and documented?
- Is the planned investment necessary for the activity and capable of being retained?
- Is net job creation achievable within six months and sustainable?
- Which income and costs relate to ZEC operations, and how will they be separated?
- Does the structure remain attractive when compared with Spain’s ordinary regime and other incentives?
Island choice, ZEC business plan and end-to-end support
The island should not be chosen on the legal minimum alone. Advixy compares the Tenerife or Gran Canaria threshold with the other islands and tests it against the actual activity, talent, customers, logistics, resources, funding and other available incentives.
Location decision
We compare the minimum investment and employment —€100,000 and 5 jobs in Tenerife or Gran Canaria; €50,000 and 3 jobs on the other islands— with the project’s substance and operational needs.
ZEC business plan
We prepare the plan covering the business model, market, viability, forecasts, investment, jobs, operations, international competitiveness and contribution to Canary Islands development.
Application and follow-up
We support the preliminary assessment, documentation, application, Consorcio queries, implementation and subsequent monitoring of the authorised commitments.
Frequently asked questions about ZEC
Does the whole company automatically pay 4%?
No. The special rate applies to the portion of the tax base attributable to operations materially and effectively carried out in the ZEC area and within statutory limits.
Is incorporating a Canary Islands company enough?
No. Authorisation, registration, an eligible activity, effective management, a resident director, investment, jobs and operations consistent with the plan are required.
Is the minimum investment always required?
The general rule is €100,000 in Tenerife and Gran Canaria and €50,000 on the other islands. The law permits an exceptional authorisation where minimum employment is exceeded, but it must be assessed and approved.
May a ZEC entity conduct other activities?
It may do so through a differentiated branch. ZEC benefits do not apply to those activities and the required accounting separation must be maintained.
Test the fit before designing the structure
Advixy compares ZEC with Spain’s ordinary regime and other Canary Islands incentives so that the structure follows the real project rather than a predetermined solution.
Assess my projectAdvixy S.L. · Santa Cruz de Tenerife · Meetings by prior appointment only
