Tax incentives for animation in the Canary Islands

The number of animation companies settled in the Canary Islands has multiplied by four since 2015. One of the reasons is that the Canary Islands offer a series of appealing tax incentives for audiovisual production companies thanks to the Canary Islands Economic and Tax Regime (REF) within the legal framework of the European Union and Spain. This fact, together with the weather conditions and the presence of a solid audiovisual sector, makes the Canary Islands one of the best places of Europe to receive audiovisual productions. In today’s post, we show you all the reasons why the Canary Islands is the perfect home for animation production companies in the Canary Islands. Know the tax incentives for animation in the Canary Islands here!

Tax Incentives for Animation Production Companies in the Canary Islands

50 – 45% deduction for foreign productions

  • 50% direct deduction of expenses made in the Islands for the first million euros.
  • 45% direct deduction for the rest of expenses eligible in the Canary Islands.
  • The Production Service Company must have its tax residence in the Canary Islands.
  • Maximum deduction: 18 million euros.
  • 0% VAT (IVA)

The requirements to receive this deduction are:

  • Minimum budget of 2 million euros.
  • Minimum expense of 200.000 euros in the Canary Islands.
  • Eligible expenses in the Canary Islands directly related to the production process:
  • Creative staff with tax residence in Spain or in the European Economic Community. Maximum 100.000 euros per person.
  • Expenses in technical industries and other suppliers.

50 – 45% deduction for Spanish productions and co-productions

  • 50% tax credit for the first million euros of Spanish budget. 54% tax credit for the first million in certain productions.
  • 45% tax credit for the rest of Spanish budget.
  • Maximum deduction: 18 million euros.
  • No minimum budget.
  • No minimum expense.

Requirements:

  • The Spanish producer must have a tax residence in the Canary Islands.
  • A Canary Islands Audiovisual Production Certificate, nationality and culture test is required. 
  • 15% of production time in the Canary Islands for works with a budget of over 5 million euros and 20% for works with an inferior budget.

Canary Islands Special Zone (ZEC)

Any company that develops activities of production or related to the audiovisual sector can become a ZEC entity. The advantage of the Canary Islands Special Zone is the possibility to have a reduced taxation rate of 4% in corporate tax, instead of the current Spanish 25%.

This tax advantage is compatible with the above mentioned. The ZEC entities can develop a wide range of activity within the audiovisual sector, such as:

  • Cinematographic or video production.
  • Production services, filming, and post-production assistance. Dubbing, edition and reproduction of supports and engravings, and so on.
  • Photography and advertisement. Photography activities and film processing. Direction of catalogues, publications, and promotional material. Creation and execution of advertising campaigns.
  • Audiovisual distribution.

The benefits of being a ZEC entity:

  • Only 4% fee of corporate tax.
  • Tax exemption on Property transfer and documented legal acts.
  • IGIC exemption for the import of raw material, investments, or products. 
  • Application of the International Dual Taxation.
  • Cancellation of the restriction to apply a deduction for double internal taxation on dividends.
  • Outside Spain there would be an exemption of the withholding tax, applying the International Dual Taxation upon arrival.
  • Suppression of the restriction for double internal taxation on dividends.

Requirements:

  • To be an entity (or a subsidiary) of new creation.
  • At least, one of the administrators must have a tax residence in the Canary Islands.
  • To invest a minimum of 100.000 euros on fixed assets within the first two years after having registered the ZEC company.
  • To create at least 5 employment opportunities within the first 6 months of activity, maintaining this yearly average for as long as the company is registered in the ZEC. 

Other reasons to produce animation in the Canary Islands

Infrastructure and cutting-edge connectivity

  • Optic Fiber, high speed, and internet connection anywhere.
  • Supercomputer Teide HPC optimized for rendering.
  • 6 Submarine internet cables which connect the Canary Islands to the European continent. 

Great Aerial Connectivity

  • International airports with millions of passengers, yearly.
  • Connected to hundreds of important airports in European cities.
  • Between 2 and 4 flight hours to the mainland and Europe.

Institutional Support

  • Public and private training programs.
  • Programs of public support for employment.
  • Specific events for the sector.
  • Inspection visits.
  • Tenerife is the venue for Quirino Awards and participates in important international events of animation (Cartoon, Annecy, MIP …)

Excellent quality of life to work

  • Average annual temperature of 23°C
  • Affordable housing, and school prizes.
  • Competitive salary.
  • Outdoors activities all year round. 
  • Offices near the main residential areas.

At Las Hormigas Negras we offer Advisory Services on Tax Incentives. For more information, contact us and we will explain how to enjoy the different tax benefits to film in the Canary Islands.