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Tax

Large marina filled with white and wood sail boats in Lanzarote Island.

Tax Incentives: Special Register Of Ships And Shipping Companies

There are a series of measures for ships and shipping companies consisting of different exemptions and tax rebates to which both companies and registered vessels can benefit. This public administrative register was commissioned to improve the competitiveness of shipping companies and Canary Islands ports, with the exception of those dedicated solely to fishing.

Reserve for investment in the Canary Islands (RIC)

The Reserve for Investments in the Canary Islands (RIC) was designed with the objective of stimulating investments made with a company’s own resources, eg. any self-financing of investments in companies that develop in the Canary Islands. Based on this ruling, companies that operate in Tenerife have a bonus of up to 90% on undistributed profits. To qualify for the RIC, companies must have a permanent establishment in the Canary Islands, regardless of where the company is domiciled.

Companies and legal entities subject to Corporation Tax in relation to their establishments in the Canary Islands, and natural persons subject to Personal Income Tax (IRPF) in relation to business and professional activities carried out through establishments in the Canary Islands may qualify for this tax incentive, provided they determine their net returns by direct estimation.

Tax On Capital Transfers And Documented Legal Acts

This tax levies certain transfers – including real estate transfers that are not subject to the IGIC. The general tax rate of the Onerous Capital Transfer Tax is 6.5%. Transfers of shares in Spanish companies are not usually subject to indirect taxes, unless more than 50% of the social capital is transferred (or shares that increase the participation of a certain entity when the acquirer already has more than 50%), and more than 50% of the assets of the company is comprised by real estate in Spain, provided that the transfer is considered to be carried out without a “tax evasion purpose”. In this case, the transaction will be treated, for indirect tax purposes, as a transfer of real estate subject to the Onerous Capital Transfer Tax.

IGIC

Lanzarote and the Canary Islands, enjoy a differentiated tax treatment and apply their own indirect tax, known as the Canarian Indirect General Tax (IGIC). The IGIC taxes the supply of goods and services rendered by businessmen and professionals in the Canary Islands, as well as the import of goods into the Canary Islands whatever the nature of the importer. The general rate is 6,5%, compared to the general Spanish VAT rate of 21%. The IGIC is very similar to VAT: input tax and output tax are born by the taxable person, but there are some significant differences, such as the exemption established for telecommunications services.

Canary Islands Special Zone

The Canary Islands Special Zone (ZEC) is an area of low taxation that was created within the framework of the Economic and Fiscal Regime of the Canary Islands “with the purpose of propitiating the appropriate framework for the establishment in the Canary archipelago of foreign capital and companies“, as well as promoting the economic and social progress of the Canary Islands and the creation of quality employment.

Its geographic scope extends to the entire territory of the Canary Islands. The entities of the ZEC are subject to a reduced Corporate tax rate of 4%, compared to 25% nationally or 21.3% on average in the European Union. This highly advantageous tax rate is applied to the tax base derived from the operations carried out materially and effectively in the Canary Islands.