The Canaries: time to make the permanent move?
A distant dream for many but with excellent flight and communication connections between most destinations, getting away from the hustle and bustle of your current or former working life is easier than you may think.
The Canary Islands comprises of seven main islands lying off the western coast of Africa (Tenerife, Fuerteventura, Gran Canarias, Lanzarote, La Palma, La Gomera and El Hierro). As well as a fantastic holiday destination they make the ideal setting for a happy and stress-free retirement or better quality working life.
WORKING IN THE CANARIES
BREXIT has encouraged many people to move their business and the Canary Islands having the most preferential Tax rates in Europe leads them to be a firm favourite. An over view of the most important incentives follows:
- Although part of the European Union, the Canary Islands are considered out of the territorial scope of the Spanish value added tax (VAT) and have IGIC at a 7% general rate instead of the 21% Spanish VAT general rate.
- Businesses established in the Canary Islands can benefit from tax credits for investments in Western African countries, as well as for certain exporting activities (15% of investments effectively made in the incorporation of subsidiaries or permanent establishments and 15% of certain advertising expenses).
- The Reserve for Investment in the Canary Islands (RIC) allows businesses to reduce their taxable profits up to 90% by reinvesting in certain qualifying assets in the Canary Islands (also applicable to sole traders, not just limited companies).
- Businesses established in the Canary Islands may benefit from additional deductions in comparison to the Spanish general tax deduction system. Deductions applicable vary from research, development and innovation, to film productions or acquisition of fixed assets.
If you register to work in Spain and make national insurance contributions then you can get state-run health care on the same basis as Spanish national. As a retired person in receipt of a UK old age state pension, you can request an S1 Form from the Overseas Healthcare Team and register for free healthcare in Spain. Access to healthcare by children and pregnant women in Spain is protected by law. If you are not able to get cover for state-run healthcare through any of these means, then the Spanish regional health authorities offer a special pay-in scheme (convenio especial). This is a public health insurance scheme available nation-side where you pay a monthly fee to access state-run healthcare, a scheme that is managed by each autonomous region.
The basic monthly fee is 60€ for the under 65s and 157€ for those aged 65 and above. However, prescriptions are not subsidised at this rate so you would pay 100% of prescription costs. This form of cover doesn’t give holders the right to an EHIC at this time, so if you wish to travel, you will need to take out private travel insurance. You will need to check if the scheme is available in your chosen region.
RETIRING IN THE CANARIES – SPAIN
If you are wondering about ways to change your life for the better, perhaps you should consider retirement abroad. Spain is popular among expats who are looking for a retirement that combines a low cost of living with sunny climate. Income tax may be higher due to a lower personal allowance than in the UK but it is still a place where your savings will take you further and offer you a higher standard of living.
CANARIAN SPECIAL ZONE (ZEC)
ZEC is a low tax zone created in the Canary Islands, authorised by the European Commission in January 2000. New Companies carrying out an activity that has been authorised by the ZEC Consortium Board have many benefits amongst some of the following:
- Reduced tax rate of 4% on Corporate Income Tax as opposed to the 25% currently in force.
- Exempt from the Property Transfer and Stamp Duty Tax.
- Exempt from IGIC on import (both of raw materials and investment materials or finished products), and exemption in operations with other ZEC companies.
- Dividends sent from the ZEC Company to the parent company outside Spain would be exempt from paying tax at source, applying the International Double Taxation Agreement at destination.
Requirements to be a ZEC company:
- To be a new company or branch
- At least one of the administrators must reside in the Canary Islands.
- Invest a minimum of 100,000 € /50,000 € (depending on whether the activity takes place in a capital island –Tenerife or Gran Canaria – or in one of the smaller islands).
- Create at least 5 jobs / 3 jobs (depending on whether the activity takes place in a capital island –Tenerife or Gran Canaria – or in one of the smaller islands).
Please visit our sponsors, contact E.B.F. Consulting for assistance with the tax and legal obligations of your move.