Company tax in the Canary Islands, Basque Country and Navarra

Key rules

• ZEC rate: Authorised new ZEC entities pay 4 percent, but only on a capped tax base.
• Authorisation: You must be authorised by the ZEC consortium before you can use the ZEC rate.
• Basque and Navarra rates: The general rate is 24 percent in the Basque territories and 28 percent in Navarra.
• Tax domicile: At 10 million euro of operations or less, only the authority of your tax domicile taxes you.

Do special regimes apply to you?

Only if your company is in a specific place and meets specific conditions. Most companies in Spain use the common regime, with a general rate of 25 percent. The three special cases are the Canary Islands (two separate schemes), the Basque Country and Navarra. The decision block below helps you pick the one that fits.

Canary Islands: the special zone (ZEC)

The Zona Especial Canaria (ZEC) taxes qualifying companies at 4 percent. It is not automatic. It is for newly created entities, and the ZEC consortium must authorise you first.

You need to meet these conditions:

• Your registered office and effective management are in the ZEC area.
• You carry out an authorised activity: industrial, service, or certain trade and logistics activities.
• You create at least five jobs within six months and keep them. Some cases need more.
• You invest at least 100,000 euro in fixed assets within two years. The figure is 50,000 euro on La Gomera, El Hierro, La Palma and certain other islands.
• At least one administrator lives in the Canary Islands.
• You present a business plan and keep accounts.

The 4 percent rate applies only up to a capped tax base, and the cap depends on your number of jobs. Profit above the cap is taxed at the normal rate. The regime has been extended to 2026 and beyond. Confirm the current job numbers, investment thresholds and caps with the ZEC consortium before you commit.

Canary Islands: tax breaks without the ZEC

An ordinary company with an establishment in the islands can get relief without joining the ZEC:

• Reserva para Inversiones en Canarias (RIC): you can reduce your taxable base by up to 90 percent of undistributed profit. You must record the reserve and leave it untouched. You must invest the profit in qualifying assets in the islands within four years and keep them for five. The assets must be used in your business there.
• Deduction for investments (DIC): a tax credit for investing in the islands.
• Production deduction (DPC): a 50 percent cut in the rate on profits from selling goods produced in the islands.

Percentages and limits vary with company size and year. Check them with the Canary Islands tax agency.

Basque Country and Navarra

These territories run their own company tax. They are not part of the common regime.

• The general rate is 24 percent in the Basque territories (Álava, Gipuzkoa and Bizkaia) and 28 percent in Navarra.
• Small companies pay reduced rates: roughly 19 to 23 percent in the Basque Country and 23 percent in Navarra, depending on size.
• Each territory sets its own deductions, depreciation tables, loss carry-forward rules and incentives such as R&D. The three Basque territories also differ from each other, so do not assume that one applies to all.

Rates and rules change by territory, so check the current rules of the one that taxes you.

Which tax office taxes you?

• If your operations last year did not exceed 10 million euro, one authority taxes you entirely: the one where your tax domicile is. Your tax domicile is your registered office, or your place of effective management if that is different.
• Above 10 million euro, each administration taxes you in proportion to your operations there, but only if at least 25 percent of your operations are outside your home territory.

Special rules apply for some taxes and entity types. Ask the tax office of your domicile if you are near these limits.

Choosing between options

Which company tax regime applies to your company?

• Basque Country regime: Your company's tax domicile is in Álava, Gipuzkoa or Bizkaia: the general rate is 24 percent, with reduced rates of about 19 to 23 percent for small companies, and rules differ by territory.

• Navarra regime: Your company's tax domicile is in Navarra: the general rate is 28 percent, with 23 percent for small companies.

• Common regime: Your company is taxed by the AEAT, Spain's tax agency: the general rate is 25 percent, with reduced rates for small and new companies.

Your tax domicile decides. If operations last year were 10 million euro or less, the authority of your domicile taxes you entirely; above that, tax is split by where operations happen once at least 25 percent are outside the domicile territory.

Timeline and deadlines

• Get authorisation from the ZEC consortium for your new entity: before you start trading under the regime

• Create at least five jobs and keep them: within six months of authorisation

• Invest at least 100,000 euro in fixed assets (50,000 euro on La Gomera, El Hierro, La Palma and certain islands): within two years of authorisation

Frequently asked questions

How many jobs must a ZEC company create?

A ZEC company must create at least five jobs within six months of being authorised, and keep them. Some cases need more. The reduced 4 percent rate applies only to a tax base capped according to the number of jobs.

Can an ordinary Canary Islands company get a tax break without joining the ZEC?

Yes, an ordinary company with an establishment in the Canary Islands can use the investment reserve (RIC), which cuts the taxable base by up to 90 percent of undistributed profit. The profit must be invested in qualifying assets in the islands within four years and kept for five. There is also a deduction for investments in the islands and a 50 percent rate reduction on profits from selling goods produced there.

Which tax office taxes my company if I have activity in the Basque Country or Navarra?

If your company's operations last year were 10 million euro or less, it is taxed entirely by the authority of its tax domicile. Above that, it is taxed by each administration in proportion to its operations there, if at least 25 percent happen outside the domicile territory.

Are the Basque territories all the same for company tax?

No, Álava, Gipuzkoa and Bizkaia each set their own deductions, depreciation tables, loss rules and incentives, so details differ between them. The general rate is 24 percent in the Basque territories and 28 percent in Navarra. Check the rules of your own territory.