In the Canary Islands the general rules of the Spanish tax system are applied, which implies the application of a modern tax system, which is also fully harmonized with the European Union regulations.
Therefore, it is possible to make business within the rules of the European Common Market, enjoying the freedom of capital movement, merchandises and people within the European Union. Nevertheless, in the particular case of the Canary Islands, it is applied also a set of specific rules that constitute the Tax and Economic Regime of the Canaries (REF).
The tax regulations of the REF consist in several very advantageous tax benefits, both in direct and in indirect taxation, which purpose is to promote the economic development of the Canary Islands. These tax benefits are complementary to the Spanish tax system, and as such are fully compatible with the integration of the Canary Islands in the European Common Market, and are also adapted to the Guidelines on State Aids for regional purpose and to the Aid Maps, approved by the European Commission for the period 2007-2013.
The REF tax benefits are considered an State Aid granted by the European Union through an Authorization of the Council, taking into account the situation of the Canary Islands as an Ultraperipheric Region of the European Union. In this sense, the present valid authorization extends its effects to the period 2013-2020 renewable.
The main regulations of the Canary Islands REF are contained in Law 19/1994, of the 6th July, for the Amendment of the Economic and Tax Regime of the Canary Islands, and Law 20/1991, of the 7th June, for the Amendment of the tax aspects of the Economic and Tax Regime of the Canary Islands. One of the main and defining characteristics of the tax benefits of the Canary Islands is that the most relevant benefits are conditioned to the execution of a productive investment in the Canary Islands.
This way, the REF regime establishes a tax and legal environment that favours the investments in the Canary Islands, in such a way that the Archipelago is shown as an especially attractive destination for foreign investors. On the other hand, the remaining tax benefits described in this section also contribute to reduce greatly the tax burden in the Canary Islands.
Discount for production of tangible assets. An incentive that offers a 50% reduction on tax liability on profits attributed, to production and industrial activities
Canary Islands General Indirect Tax. A tax that is similar to VAT but specific to the Canary Islands and with lower applicable rates. The general rate is 7%.
Special taxes. The taxes on fuels, alcoholic drinks, and certain types of transport are significantly lower than those in the rest of the European Union.
Gran Canaria Free Zone (ZEC). A customs-free zone in which goods can be stored, transformed and distributed for an unlimited period of time without the imposition of tariffs or taxes."
Canary Islands Investment Reserve (RIC). An incentive that reduces the tax burden on up to 90% of company profit if it is allocated to certain investments linked to the growth of the activity. An incentive that provides a 25% deduction on the taxable amount of investments in Fixed Assets investments Deduction for fixed assets.
Greater deductions compared to the Spanish general tax regime, for investments in activities such as R+D+i, vocational training and Information Technologies.
Within the REF it can be distinguished clearly two different types of tax benefits:
Tax benefits conditioned to the execution of a productive investment, such as the Reserve for Investment in the Canary Islands, the tax credit for investment in fixed assets, the improved tax credits in the Canary Islands, along with certain exemptions in indirect taxation.
Tax benefits that reduce significantly the tax burden in the Canary Islands, such as the Special Canary Zone ZEC (although a minimum investment is required, the ZEC is mainly a low taxation area), the tax benefit for the production of corporal goods, the Special Register for ships and shipping companies, the regulation of the Canary General Indirect Tax (IGIC), and the specific regulation of Special Taxes. The tax benefits mentioned above constitute the tax regime of the Canary Islands REF.
Our latest investment report on Kuwait was recently published in one of the leading Spanish dailies, ABC. FindMe in Kuwait explores the economic perspectives of Kuwait and the country´s future plans to compete with its fast developing neighbours. Once the leading country of the Gulf, Kuwait has remained silent for the past decade. And although many would like to see faster changes, Kuwait is moving, at its pace, to them. Inexorably. Learn about who is who in Kuwait and read what the leaders say about their own future in our upcoming release: FindMe in Kuwait Mobile app.
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FindMe in Bahrain is available at the local bookstores Jashamal and online as well as in the Apple Store. It is a full business leisure and business guide for any investor or visitor interested in traveling to Bahrain or for those that already live there.
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In contains general information about the country´ economic performance and who is who as a sectorial overview and a leisure guide.
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