ZEC and Special Territories: Pay 4% Corporate Tax in the Canaries

Spain's special fiscal territories — the Canary Islands, Ceuta, and Melilla — offer reduced corporate tax rates and investment incentives authorised by the European Commission as compatible state aid. The Canary Islands Special Zone (ZEC), governed by Royal Legislative Decree 1/2019, provides a 4% corporate tax rate (versus the standard 25%) for entities conducting qualifying activities with genuine economic substance in the archipelago, with the current EU authorisation open to new registrations until 31 December 2026. The Reserva para Inversiones en Canarias (RIC, Art. 27 of Law 19/1994) allows Canary Islands-taxable companies to reduce their IS taxable base by up to 90% of undistributed profits committed to eligible investments within four years; companies with genuine activity in Ceuta or Melilla benefit from a 50% corporate tax bonus under Arts. 33–34 of Law 20/1991.

Our experience advising companies that operate in territories with special regimes allows us to design structures that maximise available incentives without compromising compliance. We know the requirements, the limits, and the best practices to ensure benefits are maintained sustainably over time.

Why the Canary Islands ZEC is Spain’s Most Important Tax Opportunity Before 2026

A technology services or consulting company with EUR 2 million in annual profits pays EUR 500,000 in corporate tax at the standard 25% rate. The same company, with genuine activity and economic substance in the Canary Islands under the ZEC, would pay 4%: EUR 80,000. The annual saving of more than EUR 400,000 is not aggressive planning — it is the use of an EU Commission-approved regime expressly designed to offset the structural disadvantages of Spain’s extra-peninsular territories. The problem is that many companies are unaware of their eligibility, or attempt it without specialist advice and lose the benefits by failing to meet the substance requirements: inadequate business premises, employees who do not actually reside in the territory, or management decisions taken from the mainland. And the window is closing: the ZEC authorisation expires in December 2026 and the Consortium registration process takes two to four months.

Our ZEC Registration and Special Territories Structuring Process

Our specialists first assess the company’s actual eligibility and quantify the potential saving with concrete figures. We recommend the optimal combination of regimes — ZEC plus REF plus RIC in the Canary Islands, or the 50% bonus in Ceuta or Melilla — depending on the activity, sector, and investment plans. We manage the entire ZEC registration process with the Consortium, including the business plan with employment and investment commitments. We design the genuine substance structure that withstands an AEAT review: appropriate premises, employees with effective residency, contracts with local suppliers, and documented management decisions taken in the territory. Once the structure is operational, we monitor continuous compliance with all requirements.

ZEC Eligibility: Employees, CNAE Codes, and Investment Minimums

Access to the ZEC requires meeting cumulative requirements that should be verified before initiating the process. On employment, the general rule requires a minimum of five employees in the Canary Islands for most activity categories; for certain high-value-added or investment-intensive activities, the threshold may be reduced to one or two employees under specific conditions. Employees must have their workplace and effective residence on the islands.

On activity eligibility, the ZEC admits a closed list of CNAEs covering primarily: software publishing and IT activities (CNAE groups 58-63), professional and technical services including legal, consulting, accounting, architecture, engineering, and advertising (groups 69-74), administrative and business support activities including staffing and security (groups 78-82), qualifying wholesale trade and logistics, and research and experimental development (group 72). The specific CNAE code of the business activity is determinative: we verify eligibility before initiating any process.

The minimum investment committed in the business plan is EUR 100,000 for companies locating in Las Palmas de Gran Canaria or Santa Cruz de Tenerife, and EUR 50,000 for those locating on other islands. This investment must be materialised in productive fixed assets related to the authorised activity.

Regulatory Framework: ZEC, RIC, and Special Territory Regimes

The Canary Islands Special Zone is governed by Royal Legislative Decree 1/2019 and authorised by the European Commission as compatible state aid. The 4% reduced rate applies to the taxable base from authorised activities, subject to limits based on number of employees and investment level. The RIC is regulated under Art. 27 of Law 19/1994: it allows reduction of the taxable base by up to 90% of undistributed profits committed to investment in the Canary Islands within four years. The ZEC authorisation has been renewed to December 2026, with negotiations underway for its extension. The Ceuta and Melilla 50% corporate tax bonus is regulated under Arts. 33 and 34 of Law 20/1991.

Real Results in ZEC and Special Territories: Savings of up to 80% in Corporate Tax

• Quantification of potential tax savings before starting the process: concrete figures on which to decide the investment in the relocation.
• ZEC registration managed end-to-end, with business plan approved by the Consortium in 2-4 months.
• Genuine substance structure, documented and robust against any AEAT or European Commission review.
• Annual RIC management: allocation, investment timeline monitoring, and documentation for each investment.
• Monitoring of changes to the European authorisation and proactive adaptation of the structure to any modification of the regulatory framework.

Our special territories experience allows us to design structures that maximise available incentives without compromising compliance. We know the requirements, limits, and best practices for maintaining benefits sustainably over time.

Spain’s special territorial fiscal regimes are one of the significant competitive advantages the country offers to companies that establish or develop activity in these zones. The Canary Islands Special Zone offers a reduced 4% rate on corporate tax — compared with 25% under the standard regime — for a broad list of qualifying activities including technology services, logistics, commerce, and consulting. For a company with average profits, the difference in the tax bill can reach six figures annually, with a direct and lasting impact on business profitability.

However, special territory regimes are not a free benefit. They require genuine economic substance: appropriate business premises, employees with effective residence and activity in the territory, and management decisions actually adopted in that jurisdiction. The European Commission supervises these regimes as state aid compatible with the internal market, meaning investment and job creation requirements set out in the initial authorisation must be met. Non-compliance not only forfeits the benefit: it can generate a reassessment with late-payment interest and penalties exceeding the savings achieved in prior years.

The Reserva para Inversiones en Canarias (RIC) is a complementary incentive to the ZEC that allows any company taxable in the archipelago to reduce its taxable base by up to 90% of undistributed profits committed to investment in the territory within four years. The RIC is a powerful tax deferral mechanism that, well planned, converts reinvestment into tax advantage. Our team manages the annual RIC allocation, monitors investment commitment timelines, and documents each investment for any AEAT review.

Ceuta and Melilla offer a 50% corporate tax bonus for companies with genuine activity in those autonomous cities, equivalent to an effective rate of 12.5%. For foreign trade, logistics, or services activities, the geographical proximity to Morocco and North Africa adds a strategic dimension beyond the fiscal incentive. We advise on presence structures in Ceuta and Melilla that are robust before the Administration and generate real operational value, coordinating where needed with our trade and customs teams to optimise the customs dimension as well.