ZEC Canary Islands: 4% Corporate Tax (vs 25% Standard) 2026

The Canary Islands ZEC: Europe's Best-Kept Tax Secret

While Ireland (12.5%) and Malta (5% effective) get most of the attention, the Canary Islands Special Zone (ZEC) offers a 4% corporate tax rate — the lowest in the European Union — with full EU membership, legal certainty, and no blacklist concerns.

This guide covers everything you need to know to evaluate and set up a ZEC company in 2026.

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What is the ZEC?

The Zona Especial Canaria (ZEC) is a low-tax economic zone authorized by the European Commission as part of the Canary Islands' special fiscal regime (REF Canario). It was created to compensate for the geographic isolation of the Canary Islands and attract foreign investment.

Key facts:

• Established: 2000, last extended through 2027 (expected further extension)
• Supervised by: Consorcio de la Zona Especial Canaria
• Legal basis: Law 19/1994 (REF Canario), as amended
• EU status: Approved state aid, fully compliant with EU law

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The 4% Corporate Tax: How It Works

The 4% rate applies to the ZEC tax base — the profits attributable to operations carried out within ZEC territory. The rest of the company's profits (if any) are taxed at the standard Spanish rate of 25%.

Base limits by employment

The maximum profit eligible for the 4% rate depends on how many employees you hire in the Canary Islands:

Example: €500K annual profit, 3 employees

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Additional Tax Benefits

The 4% IS is just the headline. ZEC entities also benefit from:

• IGIC exemption: Operations between ZEC entities are exempt from the Canary Islands VAT (IGIC, 7% standard rate)
• Transfer Tax exemption: No ITP on capital contributions
• Stamp Duty exemption: No AJD on corporate operations
• 40% investment deduction: New fixed asset investments in the Canary Islands qualify for a 40% deduction (vs. 5% in mainland Spain)
• RIC (Reserve for Canary Islands Investment): Up to 90% of profits can be allocated to this reserve and deducted from taxable income — effectively deferring taxation on most profits

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Eligible Activities

The ZEC covers a wide range of sectors:

• Business and professional services (consulting, marketing, IT, legal)
• International trade and distribution
• Manufacturing and industrial processing
• Logistics and warehousing
• Telecommunications and digital services
• Research and development
• Tourism and hospitality
• Financial services (with restrictions)

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Requirements to Set Up a ZEC Company

To register as a ZEC entity, your company must:

1. Be incorporated as a Spanish legal entity (S.L. or S.A.) with registered office in the Canary Islands
2. Register with the Consorcio ZEC and obtain official ZEC status
3. Hire at least 1 full-time employee in the Canary Islands in year 1, and at least 3 from year 2 onwards
4. Invest a minimum in fixed assets in the Canary Islands:
   • €100,000 in Gran Canaria or Tenerife
   • €50,000 in the smaller islands
5. Carry out real economic activity — the company cannot be a mere holding shell

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Can Foreign Companies and Non-Residents Access the ZEC?

Yes. The ZEC is fully open to foreign investors. A non-Spanish national or a non-EU company can set up a ZEC subsidiary in the Canary Islands. The requirements are the same, with some additional documentation for foreign shareholders.

Common structures used by international investors:

• Direct ZEC subsidiary: foreign parent creates a Spanish S.L. with ZEC status
• Holding + ZEC opco: holding company (in the Netherlands, Luxembourg or elsewhere) owns a ZEC operating company in the Canary Islands
• Relocation: entrepreneur or digital nomad relocates to the Canary Islands and operates through a ZEC entity

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ZEC vs. Other EU Low-Tax Jurisdictions

The ZEC offers the lowest effective rate within the EU, with full legal certainty and no reputational risk.

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How Long Does It Take to Set Up a ZEC Company?

From first meeting to fully operational:

1. Company incorporation (S.L.): 2–3 weeks
2. ZEC registration (Consorcio approval): 4–8 weeks
3. Tax registration and setup: 1–2 weeks

Total: approximately 2–3 months

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How ALY Abogados Can Help

Based in Las Palmas de Gran Canaria, ALY Abogados specialises in ZEC incorporation and ongoing compliance. We handle:

• Full ZEC registration process (incorporation + Consorcio application)
• Employment and investment compliance monitoring
• Annual compliance reviews
• Tax planning in combination with RIC and investment deductions
• Defense in case of Consorcio or AEAT audits

We work with clients from across Europe, the UK, Latin America and the US who want to establish a tax-efficient base inside the EU.

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Free Initial Consultation

If you want to know whether the ZEC is right for your business, contact us. The first consultation is free.

📞 +34 633 572 607 📧 lazaroammen@gmail.com 🌐 lazaroamable.com/en

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