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Canarias has the lowest corporate tax in Europe to attract investment. Read our blog for more information at https://offshorecitizen.net/blog/.

The Canary Islands has become the Spanish and European ‘tax haven’. Its condition of insular and ultraperipheral territory has allowed the European Union to approve the conversion of the archipelago into the European region with the lowest corporate tax in Europe. Companies covered by the Canary Islands Special Zone (ZEC) take advantage of tax benefits such as adjustments to the tax base, fee reductions or deductions. In total, the fiscal savings budgeted for 2017 amounted to 358 million euros. An important effort for the public coffers that has its justification in boosting the economy and employment in the islands.

Companies under the ZEC are obliged to create employment on the islands. Otherwise, they have to be taxed by the corporation tax for the rest of Spain. According to the report of the ZEC of 2017, the number of companies registered rose to 572 at the end of the year. These companies maintained an average of 5,757 jobs throughout the year, 900 more jobs than in the previous year.

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The archipelago has the lowest Corporate Tax in Europe and also offers other tax incentives that are benefiting large multinationals

If you take into account that the tax savings achieved by the companies stood at 360 million euros, the result is that each job cost the public purse 63,000 euros. The report of the ZEC does not detail the average remuneration of workers, but it is expected that it will not reach 63,000 gross euros per year. This means that the tax savings of ZEC companies is enough to cover salary costs.

Companies that enroll in the ZEC have the obligation to create five jobs if they are installed in Gran Canaria or Tenerife and three jobs if they are installed in the rest of the islands. A good percentage of the host companies comply with the minimum and do not hire one more worker. In particular, 94 new companies registered in 2017, of which one third declared that they will not hire more than five workers during the next five years. 64% will reach a staff of between 6 and 49 workers and only 3% will exceed 50 employees.

One-third of the companies registered to the ZEC in 2017 will be limited to hiring the minimum number of employees that the regulation marks

The minimum initial investment required for these companies is 100,000 euros. 19% of the companies installed ensures that will not exceed this threshold. On the contrary, only 7% admit that they will invest more than 1 million euros.

The companies that benefit most from this reduced taxation of the Canary Islands are foreign companies. 78% of the capital of the Canary Islands Special Zone is in foreign hands, while only 22% in Spanish. Of this 22%, 10% is from the Canary Islands and the remaining 12% comes from the rest of Spain.

Rajoy convinced the Canaries

In this last term, former President of the Government Mariano Rajoy gave an important boost to the taxation and financing of the Canary Islands. In this way, it was able to win the support of the Canary Islands Coalition and New Canaries in the processing of the General State Budgets of 2017 and also those of 2018. In the accounts of 2018 prepared by the former Minister of Finance Cristobal Montoro (and which will be approved this Thursday in Congress ) the Canary Islands tax benefit rises to 460 million euros.

How to reduce taxes?

When the tax pressure weighs heavily on your portfolio and undermines your savings, you have every interest in reducing your taxes. To help you in this process, find here some practical tips to pay less.

Summary of the page

  • 1 Reduce taxes by real estate
  • 2 Lighten up taxation by energy saving works
  • 3 Reduce or even cancel taxes by employing an employee at home

When the tax pressure weighs heavily on your portfolio and undermines your savings, there is interest in reducing taxes. To help you in this process, find here some practical tips to pay less tax with the Pinel Law.

Reduce taxes by real estate

The Pinel law put in place to replace the Duflot law aims to promote real estate investment in 2016. The State is thus prepared to grant investors tax advantages. A buyer of a new property with a rental commitment of 6 to 12 years can benefit from a tax reduction of 12 to 21%.

In addition to the Pinel scheme, the Censi-Bouvard law is also a good way to reduce taxes by 11%. The icing on the cake, the device also allows recovery of VAT.

Alleviate taxation by energy saving works

Work to improve the energy performance of housing allows individuals to deduct part of the expenses of work from their taxes. Among the works covered by the 30% fixed rate tax credit are the installation of condensing boilers, the installation of insulating shutters and the improvement of wall insulation. In addition to tax exemption, these energy saving works reduce heating bills and provide better thermal comfort in winter as well as in summer.

Reduce or even cancel taxes by employing an employee at home

Having an employee at home also allows you to benefit from a panel tax reduction. The jobs involved in this tax exemption system are childcare, gardening, assistance to people with reduced mobility or elderly, etc. With this system, households can expect up to 50% tax reduction.