Tax framework

The ZEC: a 4% corporate tax rate

The Canary Islands sit inside the EU and the EU customs territory, yet they run their own economic and fiscal regime (the REF, Régimen Económico y Fiscal). Its headline instrument for companies is the ZEC. The Canary Special Zone sets a 4% corporate tax rate for qualifying activities, compared with the 25% standard rate that applies elsewhere in Spain — a 21-point gap that changes the maths of where you locate.

What is the ZEC?

The Canary Special Zone (Zona Especial Canaria) was created by Ley 19/1994, the law that governs the islands' economic and fiscal regime. It has been extended and amended several times, most recently to keep it aligned with EU State aid rules; the current authorisation period runs to 2027 with benefits maturing thereafter. It is administered by the Consorcio de la ZEC, a public body that approves entities and keeps the ZEC Official Register.

The 4% rate does not apply to unlimited profit. It applies to a maximum taxable base that scales with the number of jobs the entity creates: from €1,800,000 for a company creating the minimum number of jobs, up to €50,000,000 once a larger headcount is reached. Income above that ceiling is taxed at the ordinary Spanish rate. The figures come from the consolidated text of Ley 19/1994 and the Consorcio de la ZEC.

Who can qualify, and what are the minimum requirements?

A ZEC entity must be newly incorporated in Spain (a company or a branch), have its registered office and effective management in the Canary Islands, and carry out an activity from the list of eligible sectors — which covers manufacturing, distribution, logistics, ICT, audiovisual and many service activities. On top of that, two thresholds apply within the first two years of registration:

• Minimum investment in fixed assets: €100,000 in Tenerife or Gran Canaria, and €50,000 in the smaller islands (La Palma, Lanzarote, Fuerteventura, La Gomera and El Hierro).
• Minimum jobs created and maintained: 5 in Tenerife or Gran Canaria, and 3 in the smaller islands.

A company below these thresholds can still operate in the Canary Islands — it simply does not access the 4% rate. Thresholds and eligible activities are set by the Consorcio de la ZEC; confirm the current list for your activity before you commit.

How does the ZEC interact with your property decision?

Whether you rent or buy shapes how you meet the investment requirement. The €100,000 (or €50,000) threshold is met through qualifying fixed assets — for example plant, fit-out, machinery or the purchase of an industrial unit. Buying premises can count toward that figure; a lease does not, although the leased operation still qualifies if the threshold is met another way. If you are weighing the two routes, our renting guide and buying guide set out the trade-offs, and industrial land covers the build route.

The ZEC and the RIC together

The ZEC rarely works alone. The RIC (Reserva para Inversiones en Canarias) lets a company set aside up to 90% of undistributed profits free of tax, provided the reserve is materialised in qualifying assets — including industrial property — within the legal deadline, under article 27 of Ley 19/1994. Alongside the IGIC (a lower indirect tax than mainland VAT) and the AIEM, these instruments are designed to offset the islands' distance from continental markets. See our glossary for each term in plain English.

Figures reflect the consolidated text of Ley 19/1994 and the Consorcio de la ZEC as of June 2026, and are subject to change. This is general guidance, not tax advice — confirm eligibility, rates and requirements with a qualified adviser. Last reviewed: June 2026.