Beginning this month, Spain's Canary Islands will offer fiscal incentives for international media companies which set up headquarters or subsidiaries on the islands.

Companies which register within the Canary Islands Special Zone (ZEC) will benefit from significant tax reductions, such as a 5% VAT versus 16% in the rest of Spain, including an exemption when importing goods.

Other tax reductions include a 1-5% corporate income tax versus an average of 33% in the rest of the EU; exemption of transfer and stamp duties and exemption in the transfer of dividends; capital gains and interests (non resident income tax).

To become a ZEC entity, companies are required to form a newly constituted entity with domicile and effective office within the Canary Islands, hire at least one manager who will reside in the Canary Islands and create at least five full-time employees within the first six months. They must also invest at least 100,000 Euros in fixed assets in the region in the first two years of business.

The ZEC tax benefit scheme was authorized by the European Commission in January 2000 with the purpose of encouraging the economic development of the Canary Islands. Media companies have only been included in the scheme as of this month.