Canary Islands company formation offers two main routes for starting a business: the standard process and the special ZEC (Zona Especial Canaria) regime. The standard route follows the general rules for forming a company in Spain, while the ZEC is a special economic zone backed by the European Commission that provides major tax advantages, including a reduced 4% corporate tax rate. Each option has its own set of requirements and benefits, depending on your business goals.

The Canary Islands are a great place to invest because of the low business taxes, reduced local VAT (called IGIC), and full access to the European Union market. The islands are also in a perfect spot between Europe, Africa, and Latin America, which makes them ideal for trade, tourism, tech, and other services.

This guide will walk you through everything you need to know about starting a business in the Canary Islands, from the required documents, requirements and more.

This is what we will cover:

Canary Islands Company Formation Options

Canary Islands Company formation can happen through two options. One is the standard option, which means setting up a Sociedad Limitada (SL) or Sociedad Anónima (SA), the two main types of limited companies in Spain. This route is ideal for those who want to start a business with fewer restrictions and requirements.

Another option is the ZEC (Zona Especial Canaria), a special economic zone that offers significant tax advantages to businesses, approved by the European Commission to support economic development in the Canary Islands. This regime provides a low 4% corporate tax rate, which is much lower than the standard 25% rate in Spain. However, the ZEC comes with stricter requirements, including the need for businesses to create jobs and make investments, to ensure that they contribute to the region’s economic growth and development.

What are the general requirements for Canary Islands Company Formation?

People signing documents If you want to grow your business in one of the lowest business tax countries or regions, the ZEC is one of the best options. The main requirements include:

  • You can set up a Limited Liability Company (SL) or a Public Limited Company (SA).
  • The minimum share capital is €3,000 for an SL and €60,000 for an SA (with 25% paid upfront).
  • The company can operate in any legal business sector.
  • You must have a registered office in the Canary Islands.
  • The company can be founded by one or more individuals or legal entities, whether Spanish or foreign.
  • There is no requirement to create jobs or make a minimum investment.
  • No special approval is needed to start your company.
  • The business will be taxed at the standard Spanish corporate tax rate of 25%.

Zona Especial Canaria (ZEC) Company Formation Requirements

To set up a company in the Canary Islands and qualify for the ZEC (Canary Islands Special Zone) tax benefits, you must meet certain conditions. These include creating a new company or branch, appointing at least one local resident as an administrator, making a minimum investment in fixed assets, creating jobs, and operating in approved business sectors.

The requirements for companies to qualify for the ZEC are:

  • The company must be newly established (not a branch of an existing business).
  • It must have its registered office and actual operations in the Canary Islands.
  • The business activity must fall within one of the ZEC-approved sectors, such as:
    1. Information and communication technologies
    2. Renewable energy
    3. Logistics and transport
    4. R&D and scientific services
    5. Film production
    6. Industrial manufacturing
  • The company must make a minimum investment within the first two years: €100,000 in Tenerife or Gran Canaria or €50,000 in the smaller islands.
  • It must create a minimum number of jobs within six months: At least 5 jobs in Tenerife or Gran Canaria and at least 3 jobs in the smaller islands.
  • At least one director must be a Canary Islands resident.
  • The company must be authorized and registered as a ZEC entity by the ZEC Consortium before starting operations.
  • It must contribute to the economic and social development of the Canary Islands.

What are the tax benefits of the ZEC?

Companies in the Canary Islands Special Zone (ZEC) pay a reduced corporate tax rate of 4%, compared to Spain’s standard 25%. The tax base is €1.8 million, but becomes unlimited if the company has more than 50 employees. ZEC businesses also enjoy exemptions from documentary and property transfer taxes, as well as from the Canary Islands General Indirect Tax (IGIC) on imports and exports. These benefits can be combined with other tax incentives if the company is based in the Canaries, but they do not apply if the corporate tax residence is abroad.

Why Invest in the Canary Islands?

  • Barrels in the basement The Canary Islands are part of Spain and the European Union, offering legal certainty and access to the European single market, making them an attractive option for those looking to invest in Spain.
  • Their strategic location between Europe, Africa, and the Americas makes them an ideal place for international trade and logistics.
  • The region offers one of the lowest corporate tax rates in the EU, with ZEC companies taxed at just 4%.
  • The European Commission has fully approved the ZEC (Zona Especial Canaria), which is designed to attract international investment.
  • Companies in the ZEC can also benefit from IGIC exemptions (the Canary Islands’ version of VAT).
  • Investors benefit from the stability of Spain’s legal system and the protection of EU law.
  • The islands have a highly skilled workforce, especially in areas like tech, logistics, and renewable energy.
  • Infrastructure is well-developed, with modern ports, airports, and fast internet connections.
  • The cost of living is lower than in many other parts of Europe, making it attractive for businesses and employees.

Documents Needed for the Canary Islands Company Formation

  • Valid passport or national ID of all shareholders and directors
  • NIE (Número de Identidad de Extranjero) for all foreign individuals involved
  • Certificate of company name reservation from the Spanish Mercantile Registry
  • Bank certificate of capital deposit (proof you deposited the minimum share capital)
  • Drafted company statutes (bylaws outlining company purpose, structure, and governance)
  • Public Deed of Incorporation signed before a Spanish notary
  • Application for a corporate Tax Identification Number (NIF) from the Spanish Tax Agency
  • Registration form for the Mercantile Registry
  • Proof of registered office address in the Canary Islands
  • Opening license (licencia de apertura) from the local town hall
  • Social Security registration documents (if hiring staff)

Additional documents for ZEC companies

  • Detailed business plan, including projected investment, jobs, and operations
  • Application form for ZEC registration, submitted to the ZEC Consortium
  • Proof of eligibility (sector, investment amount, job creation commitments)
  • Criminal record certificate for directors (translated and apostilled if from abroad)
  • Proof of director residency (at least one director must be a Canary Islands resident)
  • Approval letter from the ZEC Consortium before starting operations

Step-by-Step Process of Starting a Business in the Canary Islands

These are the steps to start a business in the Canary Islands, including the additional requirements for the ZEC process.

1. Two people signing documents Choose your company type: Decide between a Standard Company like an SL or SA or apply for the ZEC regime if you meet the special criteria and want tax benefits (4% corporate tax).

2. Reserve your company name: Check availability and reserve your company name with the Spanish Mercantile Registry (Registro Mercantil Central).

3. Obtain an NIE Number Foreign: shareholders and directors must obtain an NIE (Número de Identidad de Extranjero), a Spanish tax identification number.

4. Open a business bank account: Open a corporate account with a local bank and deposit the minimum share capital (€3,000 for SL; €60,000 for SA with 25% upfront).

5. Draft and sign the public deed. Work with a notary public to draft and sign the Deed of Incorporation, which includes the company statutes and structure.

6. Register the company. Submit the signed deed to the Mercantile Registry in the Canary Islands to obtain your official company registration number.

7. Apply for a Tax Identification Number (NIF). Request the company’s tax number (NIF) from the Spanish Tax Agency (Agencia Tributaria).

8. Register for Local Taxes and Licenses

  • Social Security (for hiring employees)
  • Canary Islands Tax Agency (for IGIC registration)
  • Local Town Hall (for opening license or “licencia de apertura”)

9. (ZEC Only) Apply for ZEC Authorization. If forming a ZEC company:

  • Submit your business plan to the ZEC Consortium
  • Meet the investment, job creation, and sector requirements
  • Await formal approval before operating under the ZEC tax regime

10. Start Operating: Once all registrations and licenses are complete, your business is legally ready to operate in the Canary Islands.

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Canary Islands Taxes Overview

Here’s a simple overview of the taxes and benefits of starting a business in the Canary Islands, especially through the Zona Especial Canaria (ZEC) program. The table below compares regular Spanish tax rates with the lower rates in the Canary Islands and the tax reductions available for ZEC-approved businesses.

Tax Type

Standard Rate (Spain/Canary Islands)  

ZEC Rate (Zona Especial Canaria)  

Notes  

Corporate Income Tax  

25%  

4%  

ZEC rate applies only to approved activities and profits in the Canary Islands.  

Value Added Tax (VAT)  

21% (in mainland Spain)  

Not applicable  

Replaced by IGIC in the Canary Islands.  

IGIC (Canary VAT)  

7% standard rate  

0% for ZEC transactions  

Lower rates: 3%, 0% for specific goods/services.  

Personal Income Tax (IRPF)  

Progressive: 19%–47%  

Same as general Spanish regime  

Depends on income bracket; applies to individuals.  

Capital Gains Tax  

19%–28% depending on amount  

Same as general Spanish regime  

Applies to sale of shares, real estate, etc.  

Withholding Tax (Dividends)  

19% (EU); up to 24% (non-EU)  

0% between ZEC entities  

Subject to DTTs or EU Directive.  

Social Security  

~30% employer contribution  

Same rate  

Required if hiring employees.

Property Transfer Tax  

6%–10% (mainland); reduced or exempt in Canary Islands  

Same  

Exemptions may apply for ZEC businesses.  

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Frequently asked Questions about Canary Islands Company Formation

Where are the Canary Islands located?

The Canary Islands lie in the Atlantic Ocean, around 100 kilometers (62 miles) west of Morocco’s coast in northwest Africa. While geographically part of Africa, they are politically and economically European, serving as Spain’s southernmost autonomous community

Why should I start a business in the Canary Islands?

You should start a business in the Canary Islands because the region offers exceptional tax advantages, including a low 4% corporate tax rate and a reduced 7% VAT, along with significant ncentives for R&D and innovation. It also provides access to a skilled, affordable workforce, a strategic location connecting Europe, Africa, and the Americas, and an outstanding quality of life with mild weather and modern infrastructure.

What is the ZEC (Zona Especial Canaria)?

The ZEC is a special economic zone within the Canary Islands that offers major tax advantages to companies that meet specific investment, employment, and sector criteria. The European Commission approves it.

What are the main types of companies in the Canary Islands?

The most common types of companies in the Canary Islands are:

  • SL (Sociedad Limitada) – like a limited liability company
  • SA (Sociedad Anónima) – like a public limited company
  • Foreign branches and subsidiaries are also permitted.

How long does it take to form a company in the Canary Islands?

Forming a company in the Canary Islands takes between 3 weeks and 2 months, depending on the type of business and how smoothly the process runs. A Sociedad de Responsabilidad Limitada (SL) can often be set up in about three weeks through electronic filing, while a larger Sociedad Anónima (S.A.) may take 5–6 weeks due to its more complex requirements. The timeline is mainly affected by steps such as preparing documentation, opening a bank account, securing the corporate name and tax ID, and registering with the commercial registry and tax authorities.

What is the minimum share capital required to start a company in the Canary Islands?

The minimum share capital in the Canary Islands depends on the company type. For a Limited Liability Company (Sociedad de Responsabilidad Limitada), it is normally €3,000, but Spanish law allows it to be as low as €1 in certain cases. For a Public Limited Company (Sociedad Anónima), the minimum is €60,000, with at least 25% paid at the time of formation.

Do I need to be a resident to open a company in the Canary Islands?

No, you don’t need to be a resident to set up a company in the Canary Islands. However, if you want to operate under the Canary Islands Special Economic Zone (ZEC), at least one director must live there, and you’ll also need to meet certain requirements for investment and job creation. For a regular company, you only need a Spanish Foreigner’s Identification Number (NIE) and a bank account in Spain, not residency.

What are the tax benefits of the ZEC?

Benefits of a ZEC company include a reduced corporate income tax rate of 4%, exemption from the Property Transfer and Stamp Duty Taxes, exemption from IGIC on imports (both of raw materials and investment materials or finished products), and exemption from operations with other ZEC companies.

Are there any restrictions on business sectors for ZEC companies?

Yes, only approved sectors can qualify, including:

  • Tech and innovation
  • Logistics and transport
  • Audiovisual production
  • Renewable energy
  • Business services
  • Tourism-related services (under certain conditions)

Excluded sectors include finance, real estate, and primary agriculture.

Can I hire local and foreign staff?

Yes, you can hire both local and foreign employees. For ZEC companies, there is a minimum job creation requirement. Foreign staff from non-EU countries will typically need a Spanish work visa, such as the Spain Highly Qualified Professional Visa. EU citizens can work without a visa but must register for CRUE Spain (Certification of Registration for EU citizens) to work legally in Spain.