ZEC: the secret gateway to business growth in the Canary Islands

What if I told you there is a place in Europe with a 4% Corporate Income Tax, full legal certainty and a privileged environment? It's not fiction, it's the Canary Islands Special Zone.

What is the ZEC really?

The Canary Islands Special Zone (ZEC, Zona Especial Canaria) is European taxation's best-kept secret. It is not an opaque tax haven, but a low-taxation regime approved by the European Commission to offset the remoteness and insularity of the Canary Islands.

Its goal is simple: to attract investment, diversify the economy and create quality jobs. In return, it offers companies a tax framework with no equal anywhere on the continent.

The "Big 4" of tax advantages

Companies registered with the ZEC enjoy a unique tax ecosystem:

1. Corporate Income Tax at 4%: Compared with the general rate of 25% in Spain or the European average of 21%. This applies up to certain taxable-base limits, which are very generous and scalable according to the jobs created.
2. IGIC exemption: Transactions between ZEC entities are exempt from the Canary Islands General Indirect Tax (IGIC, the local equivalent of VAT).
3. Dividend exemption: Profits distributed to parent companies resident in the EU or in countries with a double taxation treaty (almost everywhere except tax havens) are exempt from withholding tax at source.
4. ITPAJD exemption: You do not pay Transfer Tax and Stamp Duty (ITPAJD) on corporate transactions and the purchase of assets allocated to the activity.

Who can join this club?

The ZEC is not for everyone, but its requirements are much more accessible than people think. To be a ZEC entity, you must:

• Be a newly created entity: With its registered office and effective place of management in the Canary Islands.
• Have economic substance: At least one director must reside on the islands.
• Minimum investment: 100,000 euros (in Gran Canaria or Tenerife) or 50,000 euros (in the other islands) in fixed assets during the first two years.
• Job creation: Create at least 5 jobs (on the capital islands) or 3 (on the non-capital islands) within the 6 months following authorisation.
• Authorised activity: Your business must be on the list of permitted activities (which is very broad: from technology and audiovisual to industry and wholesale trade).

Myths and realities

Myth 1: "It's only for large multinationals"

Reality: Many SMEs and tech startups benefit from the ZEC. The employment and investment requirements are perfectly achievable for a growing company.

Myth 2: "It's bureaucratically complicated"

Reality: The process is rigorous but transparent. With the right advice, registration can be completed in a couple of months.

Myth 3: "It has a bad reputation"

Reality: On the contrary. It is a "white list" regime, fully transparent and endorsed by Brussels. Operating from the ZEC conveys an image of efficiency and regulatory compliance.

The multiplier effect on your business

Imagine your company has a pre-tax profit of 500,000 euros.

• On the mainland (25%): You would pay 125,000 euros. You are left with 375,000 euros to reinvest.
• In the ZEC (4%): You would pay 20,000 euros. You are left with 480,000 euros to reinvest.

That difference of 105,000 euros a year, reinvested in your business over 5 or 10 years, marks the difference between a company that survives and one that leads the market.

How does JAIZME help you?

Setting up a ZEC entity is not just another administrative procedure; it is a strategic project. At JAIZME we take care of the entire life cycle:

• Prior feasibility analysis: Does your business model fit the ZEC?
• Structure design: We optimise investment and employment to maximise the taxable-base limits.
• End-to-end processing: Reports, submission to the Governing Council and registration.
• Ongoing compliance: We ensure you keep meeting the requirements year after year to avoid surprises.