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Practical Manual of Companies 2021.

Taxation of branches in the Canary Islands Special Zone of entities taxed under the consolidated tax system

With effect for tax periods beginning on or after January 1, 2018, Law 8/2018, of November 5, which modifies Law 19/1994, of July 6, modifying the Economic and Fiscal Regime of the Canary Islands, adds a new Additional Provision fourteenth bis that regulates the application of the fiscal consolidation regime to entities with branches in the Canary Islands Special Zone .

This Fourteenth Additional Provision bis of Law 19/1994, of July 6, modifying the Economic and Fiscal Regime of the Canary Islands, establishes that the application of the special tax rate established in article 43 of this Law in the case of branches of the Canary Islands Special Zone for entities with tax residence in Spain will not prevent said entities from being part of a tax group that applies the tax consolidation regime provided for in Chapter VI of Title VII of Law 27/2014, of November 27, on Tax on Companies.

Notwithstanding the foregoing, the part of the tax base of the entity that is part of a tax group and that is attributable to the branch of the Canary Islands Special Zone will not be included in the individual tax base of the entity for the purposes of determining the tax base of the tax group, being the subject of a separate declaration in the terms that are determined by regulation.

Due to this novelty introduced by this provision and the lack of regulatory development, taxpayers who have branches in the Canary Islands Special Zone (ZEC) of entities with tax residence in Spain that are part of a tax group that applies the regime of fiscal consolidation, they must present two forms 200 , since the law provides that they will be declared separately:

  1. Form 200 to declare the part of the tax base to which the ZEC zone tax rate will be applied:

    The box [00079] “ZEC entities in tax consolidation” without indicating that it is part of a tax group, that is, without checking the boxes [ 00009] “Dominant entity of tax group” or [00010] “Dependent entity of tax group” included on said page 1.

    This declaration must be completed only with data relating to the branch of the Canary Islands Special Zone of entities with tax residence in Spain, both on the pages dedicated to Balance Sheet, Profit and Loss Account and Statement of changes in net worth, as well as the data relating to the liquidation.

  2. Form 200 for the part of the tax base that is not taxed at the special rate and that will apply the special consolidation regime:

    Box [00009] “Dominant entity of tax group” or box [00010] “Dependent entity of tax group” must be checked, as appropriate, included on page 1 of the Model 200, without indicating that the special tax rate applies on the part of the Canarian Special Zone branch, that is, without checking the box [00079] "ZEC entities in tax consolidation."

    This declaration must be completed only with data related to the entity that is part of a tax group and that is not attributable to the branch of the Canary Islands Special Zone, that is, data related to the individual tax base of the entity must be incorporated. for the purposes of determining the tax base of the tax group, both on the pages dedicated to Balance Sheet, Profit and Loss Account and Statement of changes in net worth, as well as the data relating to the liquidation of the part that will apply the regime of fiscal consolidation.