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Special Fiscal Regime (Canary Islands)

The Canary Islands have negotiated a special fiscal regime with Brussels. The key points of the package are as follows.

• Duration: * 2000-2006 for the setting up of the qualifying enterprises and two additional years until 2008 to avail of the fiscal incentives.
• The objectives include the attraction of investment, employment creation and development and diversification of the Canary Islands economy generally.
• Taxation levels will vary between 1% and 5% depending on the type of activity involved and the level of employment created. Additional special reductions will be granted where the proposed activity is one that doesn't already exist in the islands.
• A minimum investment of 100,000 Euros will be a precondition together with a minimum job creation of five (for each qualifying enterprise).

The Islands have had a relatively strong case to make because of their peripherality, insularity and general underdevelopment. Indeed, because of the foregoing, the Islands currently enjoy a 'vat free' regime. Instead there is a sales tax usually at a flat rate of 5%.

Undoubtedly the above unique fiscal package will generate enormous investment inflows to Tenerife and the islands generally. The implications for property are evident and exciting.

Just now (September 06) the island authorities are negotiating an *extension of this fiscal package with Brussels. The probability of success is seen as very high.

January 1, 2007

With immediate effect, this special regime has been extended until 31/12/2013 and the ZECs (Zonas Especiales Canarias) have until 31/12/2013 to obtain registration. The fiscal benefits will prevail until 31\12\2019. The corporate tax rate for qualifying entities is unified at 4%.