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ZEC initiative

IN recent months I have promoted the ZEC initiative through this column, delivering accurate, up-to-date information about this powerful, attractive and credible incentive.

My articles have been met with some confused, mis-informed or contradictory responses. For this reason, I decided to interview Sabita Jagtani, a Senior Officer from the ZEC, Canarian Government to ensure that business owners, new-start businesses, and international companies, all looking to invest in the Canaries, don’t have to endure misinformation, which often results in missed opportunities and losses of tens, if not hundreds of thousands of euros.

Can you start by explaining what the ZEC is, and why it was created?

ZEC is a low-tax scheme, created within the framework of the Canary Islands Economic and Fiscal Regime (REF), which was created for the purpose of promoting the economic and social development of the islands, and diversifying their productive structure.

This fiscal instrument was authorised by the European Commission in January 2000.

I understand that not every type of business is likely to be accepted into the ZEC, so can you give our readers an idea of the main types of business which do fit your vision for the ZEC?

Actually, the activities allowed for those entities wishing to carry out industrial, trading or service activities in the Canarian territory is quite ample, and it is indexed in a list.

Maybe it is easier to list those activities which are not allowed under this scheme, such as financial services (banking), hotel industry, building and real estate trade, retail trade, sanitary and medical care, agriculture and recruitment.

What I suggest is that if people are willing to start a business within the Canary Islands and want to create a ZEC entity, they can ask the Consortium, through Capecan Consultants, if they wish.

What are the main qualifying criteria to which an entity has to comply with to be accepted as a ZEC company?

The requirements to fulfil in order to comply as a ZEC entity are those listed under article 31 of law 19/1994, of 6th July, amending the economic and fiscal regime of the Canary Islands.

  • The entity must be newly-created and have its registered office within the geographical area of the ZEC.
  • At least one of the administrators must be resident in the Canary Islands.
  • A minimum investment of 100,000 euros must be made in the case of Tenerife or Gran Canaria, or 50,000 euros in the case of Fuerteventura, Lanzarote, La Gomera, El Hierro or La Palma, in fixed assets related to the business activity within the first two years following registration.
  • A minimum of five or three jobs must be created, depending on whether the location is one of the capital islands or an outlying island, in the first six months following registration, and this average must be maintained during the time the entity remains within the ZEC.
  • The corporate purpose must consist of an undertaking, within the area of the ZEC, one of the authorised activities.

Do the staff employed have to be Spanish citizens? Also, can part-time workers and commission-only sales staff count toward this requirement?

The staff employed can hold any citizenship, as long as they are working for the company within the Canary Islands.

The staff head-count is taken as an average, and so the entity can create five full-time posts or 10 part-time posts, or 10 full-time posts for six months only, provided the average annual staff head-count amounts to the minimum job post (five or three).

What benefits can a ZEC company expect to enjoy?

  • Reduced corporate income tax at a rate of 4%, instead of the general tax rate of 30% in force for Spain
  • Exemption in the Transfer Tax and Stamp Duty
  • Exemption on the Canary Islands General Indirect Tax (IGIC) corresponding to VAT for importing of goods and for operations within ZEC entities
  • Exemptions on withholding tax according to the Double Taxation Agreement, European Union Parent Subsidiary Directive and Non-Resident Income Tax

I speak with many international business owners who, initially, think the incentive is too good to be true. What would your advice be to these directors in order to re-assure them that they are looking at a truly great opportunity?

First of all, this tax-rebate instrument is managed by the ZEC Consortium, which is a body set up jointly by the National Government of Spain and the Government of the Canary Islands, attached to the Spanish Ministry of Economy and Finance.

The ZEC Consortium is responsible for monitoring and advising ZEC Companies, and it has also been given the duty of promoting and providing the necessary counselling for the proper functioning of the ZEC, as well as maintaining the Official ZEC Register.

We have to mention, too, that ZEC was authorised by the European Commission in January 2000, and so it is a juridical safe zone. Actually the exemptions of this instrument will not work on a tax haven territory.

Moreover, to date there are more than 800 authorised ZEC entities, and almost half of them are carrying out activities and supplying goods and services all over the world.

As an example we can name Atos Consulting, Islas Airways and E-Waste Canarias.

What would your advice be to any local business owners seriously considering the ZEC but who can not get the correct information from their current sources?

They can enter our web www.zec.org

Or ask us directly by e-mail at sjagtani@zec.org

By phone at 0034 922 298 010,

By fax at 0034 922 278 063.

Or at our office: Avenida Marítima nº 3, 5ª planta Edificio MAPFRE 38003 S/C de Tenerife

For anyone interested in learning more about the ZEC and other fantastic incentives exclusive to the Canary Islands, there will be a Government-supported event on 2nd December.

“Project December” will be an annual incentive, giving people with great business ideas, and young companies established within the last 18 months, the opportunity to be selected for a scholarship, courtesy of the Capecan Group.

The Capecan Group will also provide a place to work from, business services and support, marketing and connections, along with business coaching by an accredited business coach.

For more information about the event visit http://www.capecanconsultants.com/events/project-december/

Short URL: http://www.canarianweekly.com/?p=8938

Posted by on Nov 11 2011. Filed under Legal Matters. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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