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SPAIN — the canary islands
Spain Spain
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The Canary Islands

Unbeatable investments conditions

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A Strategic Location between Three Continents

The Canary Islands, a Spanish Autonomous Region and a full member of the European Union, is an archipelago made up of seven islands: El Hierro, Fuerteventura, Gran Canaria, La Gomera, Lanzarote, La Palma and Tenerife. The Islands are located about 70 miles off the west coast of Africa and at a distance of some 700 miles from Mainland Spain. The strategic location of the Archipelago allows the residents to enjoy an enviable quality of life. The Canarian Archipelago forms the Southern frontier of the European Union and is one of the Ultra-Peripheral Regions. They are therefore an excellent platform for trade and for capital flows, technology transfer and the exchange of services between north and south. Specifically, they are the ideal point for US companies to access the markets of West Africa with 250 million inhabitants.

General Information

The service sector and particularly the tourism sector, directly and indirectly generate the majority of the Gross Domestic Product (GDP). Trade and transportation related activities also play a major role. Industrial activity is centred mainly on the sectors of energy and water, food products, cigar making and a few other lighter industries (chemical, paper and cardboard, etc.) and construction. The Canary Islands find themselves in a dynamic of stable economic growth, greater than the Spanish and European average.

The population of the Archipelago is the youngest on a national and European level. The Canary Islands have two public universities and various research centres committed to excellent and ambitious training programs that are perfectly adapted to companies’ needs.

Basic indicators

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TOTAL SURFACE AREA: 7.447 km2 (2,874.54 sq miles)
AVERAGE ANNUAL TEMPERATURE: Min: 15ºC - Max: 24ºC (59ºF - Max: 75.2ºF)
OFFICIAL LANGUAGE: Spanish
WEIGHTS AND MEASURES: Metric System
LOCAL TIME: Corresponds to Greenwich Mean Time
CURRENCY: Euro
ACTUAL GROWTH OF GDP (2004) (%): 2.8
GDP 2004 per capita (€): 12,419 ($15,235.10)

DISTRIBUTION OF GDP BY SECTORS 2004 (%)

CONSUMER PRICE INDEX 2004 (%): 2,5
POPULATION CENSUS 2005: 1,968,280
POPULATION DENSITY 2005: 264 Inhab/km2 (684.73 Inhab/miles)
TOURIST ENTRY 2004: 9,427,270
WORKING WEEK: 40 hrs. / week
MINIMUM WAGE 2004: 490,80 eur/month (2005: $629.33)

Infrastructure

A modern network of communications: eight airports (six of them international), ten commercial ports and twelve marinas as well as an extensive network of highways. The ports of Las Palmas and Santa Cruz de Tenerife are amongst the top five in Spain for passenger and goods traffic. Many important airlines operate from the two main airports: 36 European companies (including five Spanish and three regional), two American and two African. They have the capacity to receive more than twenty-five million passengers a year and direct connections with more than fifty cities in Europe, America and Africa; two hours from Madrid, three and a half hours from Paris, four hours from Rome, London, and Frankfurt and eight and a half hours from New York. On every island there is industrial land available within industrial zones that permit fast installation with access to the best infrastructure. Approximately forty banks are active in the Islands, with a total network of about 1,100 branches. Practically all Spanish banks are present as well as branches of the most important overseas banks

Investment Incentives in the Canary Islands

The Canary Islands have historically enjoyed a special economic and fiscal system in order to compensate for their situation as islands and remoteness. The new basis of the Canary Islands Economic and Fiscal Regime (REF) maintains the excellent conditions for the encouragement of commerce and investment on the Islands. The REF is made up of a series of tax incentives related to the creation and development of business activity, which have been brought together under Spanish legislation and both approved and accepted by the European Union.

Among these incentives, the most important is the Canary Islands Special Zone or ZEC (www.zec.org). ZEC firms are subject to Corporate Income Tax at reduced rates of between 1% and 5% (General Tax rate in Spain: 30% - 35%), which makes this Autonomous Region not only an ideal holiday destination but also a highly attractive tax area for investment without being considered a tax haven. There also exist free trade zones where companies can enjoy attractive advantages and incentives if they set up there. It must finally be mentioned that the Canary Islands are an integral part of the European Customs Area, even though VAT and other special taxes existing in the European Union are not applicable in the Islands. The Canary Islands General Indirect Tax (IGIC), with a general rate of 5%, replaces the European VAT. Certain products such as telecommunications services are even exempt from IGIC.

Incentives for investments in new technologies

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The Autonomous Region of the Canary Islands is the Spanish region that has most increased its R&D&I spending over the last few years. Mention must be made here of the funding earmarked for the Technology Centres which carry out various functions of interest for the business fabric of the Islands such as the Canary Islands Technological Institute or ITC (www.itccanarias.org), the Institute of Astrophysics of the Canary Islands or IAC (www.iac.es), the Technological Institute of Renewable Energies or ITER (www.iter.es), the Research Results Transfer Office or OTRIs, the University Institute of Applied Micro-electronics or IUMA (www.iuma.ulpgc.es), Canarian Institute of Marine Sciences or ICCM, the Oceanographic Institute, the Antonio Gonzalez University Institute of Bio-organics or IUBO (www.iubo.ull.es), or the Canarian Institute of Agrarian Research or ICIA. Various development plans have also been created, which are aimed at strengthening the opportunities the islands have to offer as a business centre and a magnet for R&D investment, in order to diversify their economy and promote sectors which generate a high level of added value such as:

There also exist other grants and funding, which are structured around distinct areas and are principally directed towards financing a large part of the necessary investment required to set up, modernise or relocate a company.

Economic indicators which have encouraged foreign investment

Apart from the spectacular figures regarding the tourist sector (with over 12 million arrivals per year and far longer stays than in other regions), the Canary Islands are undergoing a sizeable economic boom that has translated into levels of economic expansion far greater than the rest of the regions of the European Union. The average growth is over 4% and the expansion process has been continuous since 1994. Most of the investment in the Canary Islands originates from the US as well as from EU countries such as the Netherlands and Germany.

The labour market in the Canaries is made up of a considerable number of highly-qualified young people, with one of the highest levels of economically active population in Spain. At the moment, ambitious infrastructure projects are being implemented such as the construction of an intercity light railway network, the ongoing improvement and extension of the port facilities and the largest scientific investment project ever embarked on in Spain: the Gran Telescopio de Canarias (GTC), which will be the most advanced of its kind. For further information, help and orientation concerning new investment in the Canaries, contact the Canary Islands Economic and Development Agency (PROEXCA, www.proexca.es / www.investinthecanaryislands.com) which also provides follow-up services for new investors setting up in the Canaries and help with any management problems until the investment matures.

The Canary Islands economic and fiscal regime's main incentives

 

Written by Sociedad Canaria de Fomento Económico S.A. (PROEXCA)


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