ZEC News

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A Decision of the European Commission Enables Companies Registered in the ZEC before 2006 to Continue Enjoying the Tax Benefits of the Zone until 2019
[2008-05-13]

A Decision of the European Commission Enables Companies Registered in the ZEC before 2006 to Continue Enjoying the Tax Benefits of the Zone until 2019

 

·          The decision of the EU authorities clarifies the situation of the 219 companies registered in the preferential tax regime prior to 2006, which have been responsible for the creation of 2,600 jobs.

·          These companies may now be included in the amended regulations governing the ZEC in accordance with Royal Decree-Law 12/2006, of 29th December, which also eased the investment and job creation requirements.

 

 

 

Canary Islands 13/05/08.-  At a press conference held this morning, the President of the Canary Islands Special Zone (ZEC), Juan Alberto Martín, announced that companies which registered in the ZEC before 31 December 2006 may enjoy the tax exemptions of the tax instrument until 2019, in accordance with a European Commission decision recently communicated to the Spanish central government. Mr Martín said that this measure clarified the legal uncertainty concerning the future of companies registered in the ZEC before 31 December 2006, which were only able to take advantage of the tax benefits until 2008.

 

“This decision has affected a total of 219 companies responsible for creating 2,600 jobs in the Canary Islands,” he said.

 

The President of the ZEC expressed his satisfaction with the decision, as it has cleared up the uncertainty and concern in relation to the future of these companies, which will now come under the new legislation. Referring to the decision of the European Commission, he explained that the reason the go ahead was given for the amendment in this particular State Aid was due to the fact that the amendment “is in line with the criteria for it to be regarded as compatible with the common market”.

 

Mr Martín explained that in the terms of the Third Temporary Provision of Royal Decree-Law 12/2006, of 29 December, companies which obtained authorisation to register in the Official Register of the ZEC prior to 31 December 2006 would be governed by the provisions of Law 19/1994 until the initial expiry date of the tax benefits on 31 December 2008. In connection with this provision, doubts arose in connection with companies registered in the ZEC before 31 December 2006, as the application of the new ZEC regulations in Royal Decree 12/2006 would limit projects authorised after 1 January 2007.

 

In relation to the future of the ZEC in the context of the world economic crisis, Mr Martín said that the growth in the ZEC, as far as the number of companies was concerned, had remained steady, or in his own words, “constant”, although he added that it was expected that projects becoming part of the ZEC would be of a higher profile.

 

“We are increasingly dealing with more technologically advanced initiatives, with greater investment and job creation,” he said, adding that two months ago, “the ZEC Consortium Board authorised a high profile group of projects, both in terms of number and quality, in what was one of the best months in the history of the Board”.

 

The President of the ZEC also said that the decision of the European Commission was open to further interpretation. He said that it opened the door for the continuation of the ZEC as State Aid beyond 2019 by stressing that the legal basis of the tax instrument lay in the nature of the Islands as an outermost region of the European Union.

 

 “This sets a precedent so that, if there is no change in the situation, the tax instrument of the ZEC may be further extended in time, which would have consequences for the Canary Islands, the ZEC and companies,” Mr Martín said, adding that one of the next steps was to inform companies and tax advisors about this. A number of meetings will in fact be held with companies for this purpose, in Las Palmas on Wednesday and in Tenerife on Friday.

 

The Vice President of the Consortium Board, Juan Pérez, also said that “we now have the legal basis to aspire to a ZEC which, over time, will incorporate these improvements”.

 

“This aspect makes the ZEC a long-term instrument,” he said. Mr Pérez highlighted the fact that the decision of the European Commission would enable companies registered in the ZEC prior to 31 December 2006 and located in the outlying islands to apply a “more favourable regime”, as, from now on, they are eligible for the reduction in the job creation requirement (now standing at three jobs instead of five) and the investment requirement (reduced from 100,000 to 50,000 euros).

 

In addition, Mr Pérez said that this was a new opportunity for Canary Islands investors, “as the traditional activities of the Canary Islands economy – tourism and construction – have reached their limits”.

 

“The entrepreneurial dynamic involves looking out for new paths leading to other activities, and this is what the ZEC is involved in: economic diversification”, which, according to Mr Pérez, “opens up possibilities for new areas of business”.

 

“The ZEC originated with a time frame of six years and an orientation towards foreign capital. The continuation of the ZEC is an added attraction as it means investments can be recovered”. In this respect, he said, “we have become a more attractive option”.

 

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