CANARAY ISLANDS

Capitals

The Canary Islands have two capitals, Santa Cruz de Tenerife and Las Palmas de Gran Canaria. The President of the Canaries must alternate his official seat between the Cities each four years.

President
Paulino Rivero Baute, the Coalicin Canaria President of the Canary Islands since 2007

Canary islands region

The Canary Islands region comprises seven islands located out in the Atlantic far south of mainland Spain and close to the coast of West Africa. The region enjoys a special fiscal status in the European Union as an ultra-peripheral region. The Islands have long been a stopping point and a historical hub connecting Europe, through Spain and in other ways, with Latin America, to some extent also North America, and more recently with West Africa. In the last two decades, the region has made a successful transition from primary to tertiary sector economy due to the increase in tourism, along with the ancillary construction industry to build the infrastructure, especially hotel and related facilities, for visitors who in total outnumber the resident population six or seven-fold. Tourism (and related businesses such as construction) is the real engine of regional development, currently representing 37% of GDP. This narrow economic base has brought prosperity to the islands, but it appears now to be a fragile one due to increased competition from other tourist destinations. There is consensus that the present heavy reliance on tourism and related construction in its current form cannot long continue, since it is necessary to vary and alter the market position of the tourist industry, but also at the same time to diversify the economic and employment base. On the social and political angles, the region shows significant disparities and tensions. The seven islands are grouped within two provinces and the regional government conducts business between the two main islands one for each province, in Tenerife and Gran Canarias. Competition and sometimes jealousy between each of the seven islands and between the two provincial groups appears to be high, sustained and endemic. Each island, even if only a few thousand strong, wants what the others all have, such as its own hospital and indeed university. This

micro-regionalism limits rational and consensual development, making it hard for leadership at regional and more local levels to move forward.

Customs and Traditions

The Canary Islands have rich customs and traditions many of which involve a good party! Carnivals or fiestas are held throughout the year and almost each town has its own celebration. They are vibrant, energetic and are a good way for visitors to learn about the history and culture of Gran Canaria. During fiestas, the locals dress up in colourful costumes, stalls sell handmade crafts, there are lots of fun games to keep the children amused and of course the food and drink is flowing. The main carnival is held every year between January and February in Las Palmas. It starts with street parties, known as verbenas del mogolln, where thousands of people dress up and dance their way through the streets until the early hours. Another highlight is known as the murgas. These are large groups of people who dress up, perform and sing about their discontent and criticisms of the local, regional or national social situation. They often use traditional well-known songs and change the lyrics to express their feelings in a humorous and ironic way. The main events of the carnival include the gala for choosing the carnival queen and the great carnival parade, which marches through the whole city of Las Palmas. Another important tradition on the island is the Romera. Every year Gran Canaria hosts many Romeras, which are religious pilgrimages in honour of a saint. People dress in traditional attire and walk through their town or village accompanied by singing and a band playing musical instruments. Lucha Canaria, Canarian wrestling, is an ancient custom which dates back to the late 1400s during the times of the first known inhabitants of the islands, the Guanches. Its popularity has grown over the centuries and today it is a major sport covered by Canarian television.

culture
Gran Canarias society has always been open to influences from beyond the seas, which has enriched the island with visiting cultures over the years. However, it has always been important for the island to preserve its ancient traditions and to keep its original identity alive. Due to its long history, this cosmopolitan island has become a synonym for cultural blending with a rich archaeological, architectural, ethnographic and artistic heritage a rare quality for a place as small as Gran Canaria. The Canarios like to celebrate festivals, be it of religious or cultural nature, and there is always something going on somewhere on the island. Internationally-renowned festivals include the International Film Festival of Las Palmas, the Festival de Msica de Canarias (Canarian Classical Music Festival) and the Festival de pera. Other events such as the WOMAD (World of Music, Arts and Dance) and the Festival de Teatro y Danza de Las Palmas de Gran Canaria (Theatre and Dance Festival) bring still more influences from the international cultural panorama to this magnificent island.

GOVERNMENT
The 1978 constitution created a bicameral parliament called Cortes, divided into the Congress of Deputies and the Senate which holds legislative power. The 350-strong Congress is elected every 4 years

by proportional representation, while the 202 senators are chosen by direct election. There are also 17 autonomous regions, the governments of which are elected every 4 years.
Santa Cruz de Tenerife (for the western islands) and Las Palmas (for the eastern islands) jointly conduct the government. Las Palmas has half of the regional government departments while the parliament and its governor are elected by the people of the Canary Islands and appointed by Madrid. The parliament, with 60 delegates, always meets in Santa Cruz de Tenerife.

Each of the Canary Islands has a cabildo insular (town hall) which allows them to self-govern to a certain extent and to assume control of local services. The islands are further divided into 77 municipios (municipalities), 21 of which can be found in Gran Canaria. An alcalde(mayor) heads up each of these Canarian municipios.

The Canary Islands are an integral part of Spain; this has been so for more than 500 years, and a huge majority of Canarians have confirmed their status repeatedly over time. The language of the Canaries is Spanish (Castilian), but the accent is more like the Spanish spoken in the Caribbean. The Canaries form an "Autonomous Community" within the Kingdom of Spain. The islands have their own Government, Parliament and Administration, established by the Statute of Autonomy of the Canary Islands. The Canarian fiscal and economic system is different from the general Spanish one, which is in force in the major part of the Mainland. As a part of Spain, the Canaries are also part of the European Union. However, the islands enjoy some exceptions in the fiscal and economic area. The currency in the Canary Islands is the euro, as in Spain. The Parliament of the Canaries is in Santa Cruz de Tenerife; the delegation of the Spanish Government in the Canaries is in Las Palmas de Gran Canaria, with a sub-delegation in Santa Cruz de Tenerife; the Supreme Court of Justice of the Canarie is in Las Palmas de Gran Canaria. The Supreme Court of Justice exercises the judicial power. Appeals against its resolutions are to the Supreme Court and the Constitutional Court of Spain.

The Special Tax Regime (REF) Although mainland tax regulations apply in the Canaries, companies operating there are also eligible for special tax incentives (the Special Tax Regime or REF). Key features of the REF are as follows: VAT is not applied in the Canary Islands; instead there is a specific Sales Tax (IGIC) which has a general rate of 5%. In addition to increased and reduced rates of IGIC, there is a zero tax rate for certain basic need products and services (eg telecommunications). Exemptions from duty on capital increases. The use of undistributed profits to reduce the taxable base provided that the amounts concerned are invested within three years in certain qualifying fixed assets or public stock. Enhanced tax credits for various types of investment.
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The Special Economic Zone (ZEC) The Canary Islands Special Zone has been created within the fiscal and economic regime of the Canary Islands for the purpose of encouraging the economic and social development of the islands and the diversification of their manufacturing and service sectors. The ZEC was initially The Canary Islands Special Zone authorised by the European Commission in January 2000. In early 2006, the Department of Economic Affairs and Finance of the Canary Islands Government suggested the introduction of improvements to the Canary Islands Economic and Fiscal Regime, including the extension of the time frame of the low tax zone beyond 2008 of 25 years for companies in the service sector and 50 years for companies operating in the industrial sector. In addition, a suggestion has been made for solving the problems related to double taxation on profits. This modification aims to make the ZEC a real stimulus for attracting companies with newly-created economic activity. At present, companies with their head office in mainland Spain are subject to double taxation on profits, which makes it difficult for them to set up in the low tax zone. Following the announcement of an extension in December 2006, the benefits provided by the ZEC will initially be available until December 31, 2019, although this may be further extended if the European Commission authorises it. Any company intending to carry out manufacturing, commercial or service activities within the territory of the Canary Islands may register in the ZEC; financial services are excluded. Permitted manufacturing, processing, handling and goods distribution activities include: Fishing; Food, beverages and tobacco; Clothing; Leather goods and footwear; Furniture and related products; Paper, publishing, graphic arts and reproduction of recorded material; Building materials; Machinery and mechanical equipment; Electrical, electronic and optical materials and equipment; Chemicals; Recycling; Wholesale and distributive activities; Packaging, bottling and canning

Permitted service activities include: Transport and related activities; IT; Natural resources and waste disposal; Telecommunications; Advertising; R + D; Education and Training; Consultancy; Legal and fiscal services; Other services

Service companies registered under the ZEC may be set up in any part of the Canary Islands. Production, processing, handling and distributive activities must be located in certain Designated Areas at: On the island of Grand Canary o The Port of La Luz and Las Palmas o Gando Airport o The Arinaga Industrial Estate On the island of Tenerife: o The Port of Santa Cruz de Tenerife o Los Rodeos and Reina Sofa Airports o The Granadilla Industrial Estate

There are Designated Areas on each of the other Canary Islands. Any Company wishing to set up in the ZEC must satisfy a number of requirements, of which the most important are: A ZEC Company must be newly incorporated; At least one of the persons authorised to manage and act on behalf of the Company must be resident in the Canary Islands; A ZEC Company must make an investment of at least EUR100,000 (EUR50,000 in some locations) in fixed assets related to the activity within the first two years subsequent to authorisation; A ZEC Company must employ at least five persons (reduced to three in some locations) in the ZEC area within the first six months subsequent to authorisation and must retain this number of employees, on average, throughout its lifetime; A ZEC Company must present a description of its activities, with particular mention of its economic viability, international focus, contribution to the economic and social development of the Canary Islands and solvency.
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Taxation of ZEC Companies ZEC companies enjoy the following tax benefits: Corporation tax (levied in Spain at 30%) is charged at 4% on profits derived from ZEC activities. The rates depends on: o Net creation of employment; o The period of inclusion in the Register of ZEC Companies; o Whether the activity is new or pre-existing; o The type of activity ZEC companies are exempt from Capital Transfer Tax and Stamp Duty in the following circumstances: o Purchase of goods and rights for the conduct of the business activity of the ZEC company within the geographical area of the ZEC; o Company operations except liquidation; o Stamp duty on documents connected with the companys operations in the geographical area of the ZEC

ZEC companies are exempt from Canarian Indirect General Tax (Canarian Sales Tax) on delivery of goods and provision of services from one ZEC Company to another, and on imports. International Double Taxation Treaties and the EU Parent-Subsidiary Directive: the Canary Islands are an integral part of the territory of Spain and the European Union. Therefore ZEC companies may take advantage of Double Taxation treaties signed by Spain and the EUs Parent-Subsidiary Directive. ZEC Companies are not obliged to deduct tax from payments for tangible assets made by them.
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Registration of a ZEC Company Application, authorisation and registration are the three steps required of companies wishing to set up within the ZEC. The application must be presented together with the description of the intended activities. The Consortium Board will then decide on the application and will inform the applicant of its decision within the space of two months from the date of presentation. The new company must be incorporated by a Notary Public and must be registered on the proper Registers (this may be done prior to authorisation being received). Once authorisation has been received, the company must be registered on the Official ZEC Register, which is managed by the Consortium Board. ZEC Companies are subject to the following fees: Registration fee Annual fee to remain on the Official ZEC Register

Economy & Industries

The main bulk of the Canarian economy centres on the tourism industry, accounting for up to 80 per cent of the gross income of the archipelago. With one of the most favourable climates in the world, the Canary Islands attract millions of tourists every year. Besides that, locals rely on the banana industry, other agricultural exports and new tourismrelated service industries to make a living. In the centuries following the Spanish conquest, the mainstays of the Canarian economy were the sugar and winemaking industries. Sugar production on the islands started right after the conquest with sugar-cane imported from Madeira, but it declined in the middle of the 16th century. This was due to the strong competition from Brazil and the Caribbean, which could produce sugar much cheaper. The winemaking industry, which enjoyed its peak during the 16th century, collapsed at the beginning of the 18th century due to a locust plague and mildew attacks, which destroyed the vineyards. However, it has since been revived, with the wines of Gran Canaria, Lanzarote, La Palma and Tenerifeproving increasingly popular. From about 1830 to 1870, as the demand for carmine food dye grew, cochineal production boomed throughout the islands - promising a better future, particularly for the poorer population. Yet this dream did not last very long. The development of synthetic dyes had a considerable impact, causing the decline of the cochineal industry. However, the archipelagos economy was saved around 1850 with the introduction of the industrial cultivation of bananas to the islands. Growing the fruit gradually gained in importance and bananas became the islands main export product, reaching its peak at the start of the 20th century. Yet again, there was strong competition surrounding

foreign exports, this time from Latin American countries. Surviving on exporting bananas alone was hopeless and local farmers were forced to diversify by cultivating tomatoes, potatoes, other vegetables and exotic fruits. Today, bananas sold on the Spanish market are protected against foreign suppliers, but their cultivation has become unprofitable due to higher costs and water shortage. Tomatoes are grown on a large scale, mainly for exports between November and April. In recent years the cultivation of flowers and plants for export has also developed into a flourishing industry.