ZEC — Canary Islands Special Zone

What Is the ZEC?

The ZEC (Canary Islands Special Zone) is a low-tax area integrated within the Canary Islands Economic and Fiscal Regime (REF), governed by Law 19/1994 and its subsequent amendments. It was created to promote the economic development of the Canary Islands and diversify its productive structure beyond tourism.

ZEC entities pay Corporate Income Tax at 4% on the special ZEC tax base — the portion of profits derived from authorised activities involving clients or suppliers not resident in the Canary Islands — compared to the general rate of 25%. This benefit is approved by the European Commission as state aid compatible with the internal market.

Key date: the registration window for new entities in the Official ZEC Registry is open until 31 December 2026. Entities registered before that date will be able to benefit from the ZEC regime for the period approved by the European Commission.

Requirements to Register with the ZEC

• Establish or domicile the effective headquarters in the Canary Islands (primarily Gran Canaria or Tenerife, though other islands are also eligible)
• Make a minimum investment in the Canary Islands of EUR 100,000 in fixed assets (EUR 50,000 on smaller islands) within two years of registration
• Create at least 5 jobs in the Canary Islands within six months (3 on smaller islands) and maintain them throughout the period the regime is in force
• The principal activity must be one of the activities authorised under ZEC regulations

Authorised Activities

The ZEC covers a wide range of economic activities, including:

• Business services (consulting, engineering, information technology, training)
• International trade activities (purchasing centre, distribution)
• Manufacturing and raw material processing
• Telecommunications and information technology
• Audiovisual and digital content activities
• Research and development
• Maritime and air transport
• Financial and insurance activities (with limitations)

Purely local activities or those directed exclusively at the Canarian market are excluded or have limited access to the regime.

Additional Benefits Beyond the Reduced Rate

• Exemption from withholding on dividends distributed to non-resident shareholders (except residents in zero-tax territories or tax havens)
• Exemption from withholding on interest and royalties paid to non-residents under certain conditions
• Compatibility with other REF deductions (RIC, investment deductions)
• IGIC at 0% on most ZEC transactions

Comparison with Other European Regimes

At an effective rate of 4%, the ZEC is one of the lowest preferential fiscal regimes in the European Union for genuine business activities, comparable to similar regimes in Madeira (Portugal) or Malta, but with the advantage of being part of the Spanish and EU customs territory.

Relevance for Businesses

The ZEC represents a unique opportunity for companies that can establish genuine activity in the Canary Islands before the registration period closes on 31 December 2026. It is particularly attractive for technology services companies, international consulting firms, e-commerce businesses, and IP-based businesses that can operate from the Canary Islands serving international clients.