The Spanish Government has approved the agreement with the European Union (EU) Commission for the new Spanish special tax regime for the Canary Islands (Zona Especial Canaria, or ZEC ), which entered into force on January 1, 2015. The regime is applicable to both newly incorporated entities with their domicile and effective place of management in the Canary Islands and to branches located within the geographical area of the ZEC, provided these entities engage in the industrial, commercial and service activities listed in the relevant legislation.
The improved regime has been extended until 2026. ZEC entities are entitled to the benefits of EU directives and double taxation treaties entered into by Spain. The new regime repeals some of the previous version’s limitations; most importantly, a taxpayer can apply the advantageous 4% corporate income tax rate to all of its taxable income under certain conditions.
