economy

The Canary Islands Special Zone (ZEC) closes the door on tax incentives for holiday rentals

The Canary Islands Special Zone (ZEC) closes the door on tax incentives for holiday rental management services.

The Consortium Board of the Canary Islands Special Zone (ZEC) has approved a memorandum clarifying the criteria for authorising the registration in the ZEC of entities providing services to hotels, apartments, aparthotels, holiday homes and other establishments offering accommodation services, and stating that holiday rental management services will not be eligible for the tax incentive.


According to a press release issued by the organisation, this agreement clarifies the system for authorising the registration in the ZEC of entities providing services to accommodation establishments, which includes all types of establishments, confirms the existing system and interpretation for hotel, extra-hotel and similar establishments and clarifies the system to be applied to new developments of holiday homes.

The document specifies that the ZEC tax benefits will not apply to activities involving the provision of comprehensive management services for tourist accommodation, including holiday homes.

Likewise, the first and second points of the memorandum state, as has been the case up to now, that activities related to the provision of accommodation services and the rental of real estate for the operation of hotels, aparthotels, apartments, holiday homes or any other type of accommodation establishment will not be eligible for the benefits of the ZEC.

In accordance with the nature of the incentive, the ZEC Regulations have always excluded accommodation activities, in line with the objective of the instrument, set out in Article 28 of Law 19/1994, of 6 July, amending the Economic and Fiscal Regime of the Canary Islands, of “promoting economic diversification” by creating strategic sectors for this purpose.

Similarly, the activities of integral management of holiday homes have also been excluded from the tax benefits of the low tax regime and there is no room for differentiation since they are economically equivalent services.

HIGH IMPACT OF THE SECTOR IN THE CANARY ISLANDS

In this line, it explains that the technological development of the last decades around the collaborative and digital economy has led to the emergence of new business models related to the exploitation of properties with the aim of renting them for holiday purposes and this modality has had “a high impact” in the Canary Islands, where the growth of holiday homes has been exponential.

The Consortium points out that “this growth has led to an increase in the number of entities providing services to owners of this type of accommodation in the Islands”, and that many of these entities have been “interested” in the incentives offered by the ZEC.

To this end, the Consortium has also consulted the European Commission (EC), which has stated that these activities should be considered to be of the same economic nature as hotels, aparthotels and other accommodation services, and on this basis the Board of Directors of the Consortium has clarified and ratified that they are not authorised and therefore do not qualify for the ZEC tax incentives.


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