We coordinate the company, tax, legal, and administration steps for establishing a genuine business in the Canary Islands, from the first eligibility review through registration and ongoing compliance.
ZEC is a Canary Islands regime within the Spanish tax system. We apply the Canary Islands REF, ZEC, RIC, and IGIC rules where they govern the business. Spanish national company, corporate-tax, treaty, and non-resident rules still apply where the Canary Islands regime does not replace them.
Canary Islands Regime
A company or branch admitted to the Canary Islands Special Zone (ZEC) may pay 4% Corporate Income Tax on qualifying operations carried out materially and effectively in the Canary Islands. The rate applies only within statutory taxable-base and state-aid limits; other income can be taxed under the rate otherwise applicable to the company. We first check the activity, local substance, investment, employment, and business plan, then coordinate specialist approval and setup.
Dividends, interest, capital gains, rental income, and ownership structure can interact with your home country's rules. Tax treaties and EU rules may help, but they do not produce the same result for every owner or country. We coordinate Spanish and home-country advice before the structure is fixed.
Qualifying
ZEC is a regulated business regime, not an automatic benefit of buying a property or registering a company. For a Tenerife application, the plan will normally need to address all of the following:
A new company or branch must be entered in the ZEC register, with its registered office and effective management in the Canary Islands. At least one director or legal representative must live in the Canary Islands.
In Tenerife, the standard minimum is EUR 100,000 in qualifying fixed assets within the first two years. The investment must support the approved business activity; special exceptions require ZEC authorization.
The standard Tenerife requirement is at least five jobs created within six months of authorization and maintained while the company remains in ZEC. The business plan must show that the operation is real and viable.
The activity must appear in the statutory ZEC list. Telecommunications and computer programming, consultancy, and related IT activities are included, but the precise service and where it is performed still need to be checked.
Company Setup
A Spanish S.L. subsidiary is a separate Spanish company owned wholly or partly by a foreign parent. It acquires its legal personality when it is registered at the Commercial Registry. The exact route varies, but a typical managed process includes:
Confirm whether a subsidiary, branch, or another structure fits the activity, ownership, liability, tax position, and ZEC plan before documents are prepared.
Obtain evidence that the parent company exists, its constitutional documents, ownership information, resolutions, and powers of attorney. Documents may require an apostille or legalisation and a sworn Spanish translation.
Arrange the required Spanish tax identification numbers, company-name certificate, incorporation deed, notary appointment, share capital, and Commercial Registry filing.
Complete the final NIF and tax census registration, banking and anti-money-laundering checks, Social Security registration where staff are hired, foreign-investment declarations, accounting, and ongoing filings.
Route 1 — EU Companies
An EU company can own a Spanish subsidiary and, where the legal conditions are met, may use EU restructuring rules to bring an existing Canary Islands company into the group without a conventional cash purchase. Czechia is a useful example of how this can work.
The owners of the Canary Islands S.L. transfer their shares to the EU holding company and receive shares in the holding company. This can preserve cash for staff, equipment, premises, and business growth.
A professional valuation, a fair exchange ratio, majority voting control, company approvals, and genuine business reasons are essential. When every legal condition is met, Spanish tax on the exchange may be deferred rather than charged immediately.
We help organise Spanish tax numbers, translated and legalised company documents, resolutions, powers of attorney, the formal signing, Tax Agency communication, and foreign-investment declaration.
Tax deferral is not automatic. We arrange the necessary professional checks, including the special transfer-tax risk where a company mainly holds Spanish property that is not used in a genuine business activity.
Route 2 — UK Companies
Brexit changed the tax route, but it did not prevent a UK company from owning and operating a Spanish subsidiary. We help UK businesses establish the right Spanish structure and coordinate the extra cross-border checks from the start.
The Spanish company can trade, employ staff, hold business assets, and apply for ZEC status. ZEC approval depends on the Spanish company's qualifying activity, management, investment, employment, and real presence in the Canary Islands, not simply on the nationality of its owner.
A UK acquiring company does not fall within the EU restructuring directive used in the Czech example. The same Spanish tax deferral should not be assumed. We ask Spanish and UK tax advisers to approve the structure before any shares are transferred.
UK share-exchange rules may defer a UK capital gain when their conditions are met. HMRC advance clearance is optional but can provide valuable certainty and must be obtained before the new shares are issued.
The UK-Spain treaty can provide favourable dividend treatment, including a possible Spanish withholding-tax exemption for a qualifying UK company with at least 10% ownership. Beneficial ownership, anti-abuse rules, and any Spanish foreign-investment approval must be checked first.
Other Incentives
The general IGIC rate is 7%, rather than mainland Spanish VAT. ZEC rules can exempt imports by ZEC entities and certain supplies between ZEC entities, but not every purchase or sale is automatically exempt.
The RIC may reduce the taxable base by up to 90% of qualifying undistributed profit from Canary establishments when the reserve is recorded and invested within the legal deadline in permitted assets or activities. The rules for eligible investment and maintenance are detailed.
Canary Islands R&D and technological-innovation deductions can be valuable, but ordinary software development, maintenance, or minor updates do not automatically qualify. The project and expenditure need technical and tax review.
Incentives may interact, but they are not fully interchangeable. RIC cannot be combined with specified deductions for the same assets and costs, and EU state-aid limits can cap the total benefit.
Partner Support
Through our close cooperation with Tenerife Admin Solutions, additional customs and administration support can be arranged when it is relevant to your move, property setup, or business plan.
Support can include customs regulation guidance, import/export declarations, certificates of origin, special permits, and documentation needed for goods moving in or out of Tenerife.
When goods are involved, the right tariff classification and calculation of customs duties or Canary Islands IGIC can make a real difference to cost, timing, and avoiding mistakes.
If you are shipping items for a move, property setup, or business activity, support can be arranged around transport coordination, shipment tracking, and practical customs handling.
For clients with business or investment plans, this support can sit alongside tax, legal, company setup, and property advice so the practical paperwork is not left until the last minute.
Buying or holding a property in Tenerife does not, by itself, qualify for ZEC. A property activity should never be presented as eligible until its exact classification appears in the permitted-activity list and the ZEC authorities approve the business plan.
The RIC also has strict property rules. In particular, investment in a holiday-rental home is excluded. A special route for long-term residential rental has applied to qualifying investments since 2025, but it carries detailed conditions and is not a general tax break for any rented apartment.
Our role is to coordinate the process and the qualified professionals around your particular facts. Tax deferral, exemptions, reduced rates, treaty relief, and ZEC authorization are never guaranteed. Written Spanish and home-country advice should be obtained before any transaction is signed or implemented.
Official References
This page is a practical overview, checked against official sources current at the time of publication. The law and a client's facts can change the result.
Law 19/1994: ZEC and RIC
Canary Islands Government: REF tax regime
Spanish Corporate Income Tax Law
Invest in Spain: setting up a business