Tax Advisory in Tenerife: ZEC, RIC and the Full REF Canary Islands Regime

The Canary Islands' Zona Especial Canaria (ZEC), regulated by Royal Legislative Decree 1/2019 and authorised by the European Commission as compatible State aid, allows registered entities to pay 4% corporate income tax on their special taxable base — compared to the 25% general rate. The ZEC requires genuine economic substance in the Canary Islands: a minimum of five employees with effective residence in the islands, a minimum investment of €100,000 in fixed assets in Las Palmas de Gran Canaria or Santa Cruz de Tenerife (€50,000 for smaller islands), and an activity included in the list of eligible CNAEs. Complementing the ZEC, the Reserva para Inversiones en Canarias (RIC, Art. 27 Ley 19/1994) allows any company with activity in the Canary Islands to reduce its CIT taxable base by up to 90% of undistributed profits committed to investment in the archipelago within three years. The Deducción por Inversiones en Canarias (DIC, Art. 94 Ley 20/1991) further provides a 25% deduction on new fixed asset investments. The ZEC registration window under the current authorisation closes on 31 December 2026.

BMC has an office in Las Palmas de Gran Canaria and provides on-demand advisory presence in Santa Cruz de Tenerife, working directly with the Consorcio ZEC, the Delegación Especial de la AEAT en Canarias, and the Agencia Tributaria Canaria.

Why the Canary Islands REF is the Most Powerful Tax Incentive Framework in Spain

A technology services company with €2 million in annual profits pays €500,000 in CIT at the 25% general rate. The same company, with real activity and economic substance in the Canary Islands under the ZEC, pays 4% on its special taxable base — approximately €80,000 on a €2 million base. The saving of over €400,000 per year is not aggressive tax planning: it is the use of a European Commission-approved regime expressly designed to compensate for the structural disadvantages of the Canary Islands as an outermost EU region.

The full combination of ZEC + RIC + DIC can reduce the effective CIT rate to a small fraction of the general rate. For a company that reinvests substantially all its profits in Canary Islands operations: the ZEC applies 4% to the special base, the RIC reduces the remaining base by up to 90%, and the DIC provides a further 25% deduction on new investment. The result is an effective tax rate that can approach 3–5% of total profits — not through artificial structures, but through the exact mechanism the legislature designed in the Régimen Económico y Fiscal de Canarias (REF).

Our Tax Advisory Process for Businesses in Tenerife and the Canary Islands

Our specialist team begins with a quantified eligibility assessment: we confirm the CNAE codes of the activity against the ZEC eligible list, model the potential tax saving with concrete figures, and identify which combination of REF incentives — ZEC, RIC, DIC — maximises the outcome for the specific business.

For ZEC registration, we manage the complete process before the Consorcio ZEC: preparation of the activity plan with employment and investment commitments, documentation of the real-substance structure (offices, resident employees, local management decisions), and monitoring of the authorisation timetable. Once registered, we design the operating structure to be robust under any AEAT review — local premises, employees with effective residence, local contracts, and decision-making records demonstrating that the business is genuinely managed from the Canary Islands.

For RIC planning, we calculate the annual Canary Islands Taxable Profit (BFC — Beneficio Fiscal de Canarias), determine the optimal allocation amount, identify eligible assets under categories A1 to D1 of Art. 27 Ley 19/1994, and track the three-year materialisation deadline with preventive alerts. Our system monitors every historic RIC allocation still within the materialisation or retention window, preventing the reversals that arise from deadline mismanagement.

Regulatory Framework: ZEC (RDLeg 1/2019), RIC (Art. 27 Ley 19/1994) and DIC (Art. 94 Ley 20/1991)

ZEC — Zona Especial Canaria: regulated by Real Decreto Legislativo 1/2019 and authorised by the European Commission. The 4% rate applies to the special taxable base, subject to limits based on the number of employees and the level of investment committed. The current authorisation expires on 31 December 2026; negotiations for renewal are ongoing.

RIC — Reserva para Inversiones en Canarias: regulated under Art. 27 of Ley 19/1994 (as amended by Ley 8/2018). Maximum reduction: 90% of undistributed profits. Materialisation deadline: three tax periods from the year of allocation. Retention period: five years from the date of entry into service.

DIC — Deducción por Inversiones en Canarias: regulated under Art. 94 of Ley 20/1991. A 25% deduction on new fixed asset investments in the Canary Islands, compared to the general 15% RDI deduction on the peninsula. Compatible with the RIC.

IGIC — Impuesto General Indirecto Canario: the Canary Islands’ indirect tax. General rate: 7% (vs. 21% peninsula VAT). Reduced rates: 3% and 0% for certain supplies. AIEM (Arbitrio sobre Importaciones y Entregas de Mercancías) applies additionally to certain imports and local deliveries.

Real Results in Canary Islands Tax Advisory for Tenerife-Based Businesses

• Quantified tax saving assessment before any structural decision, with concrete figures on which to base the investment in relocation or incorporation.
• ZEC registration managed end-to-end, with activity plan approved by the Consorcio ZEC within 2–4 months.
• Real-substance structure documented and robust under any AEAT or European Commission review.
• Annual RIC management: allocation calculation, materialisation tracking, asset documentation, and five-year retention monitoring.
• Combined ZEC + RIC + DIC optimisation, with compatibility analysis and anti-accumulation limit checks.

The Canary Islands’ special economic and fiscal regime is one of Spain’s most powerful tax advantages for businesses willing to establish genuine operations in the archipelago. BMC’s presence in Las Palmas de Gran Canaria and on-demand presence in Santa Cruz de Tenerife means our clients have direct access to a team that works daily with the Consorcio ZEC, the Delegación Especial de la AEAT en Canarias, and the Agencia Tributaria Canaria.

For businesses in Tenerife evaluating the ZEC, the critical message is the deadline: the current European Commission authorisation expires on 31 December 2026. The registration process before the Consorcio ZEC takes two to four months. Businesses that wish to register under the current authorisation must begin the process no later than summer 2026. Our team monitors the renewal negotiations and keeps all ZEC clients informed of every relevant development, allowing them to adapt their planning with sufficient advance notice.

Sources and Regulatory Framework

• BOE — Ley 19/1994, Régimen Económico y Fiscal de Canarias
• Zona Especial Canaria (ZEC) — Official website
• BOE — Real Decreto-ley 2/2000 (ZEC)
• Agencia Tributaria — IGIC
• Gobierno de Canarias — Consejería de Economía