Gran Canaria: A unique regulatory environment to develop innovative projects, particularly for SMEs

Spain’s places third in Europe in terms of fiscal tax support for R&D projects, according to the OECD annual report for 2020. It is thus not surprising that the Canary Islands, thanks to its increased deduction percentages over the rest of the national territory, should be considered as the most advantageous tax system in Europe and, possibly, one of the best in the world.

This is possible thanks to the special ‘Economic and Fiscal Regime’ of the Canary Islands, which allows for increased deduction percentages on eligible expenses and extended  tax quota limit, compared to the rest of the national territory, as follows:

 Canary IslandsResto of Spain
Deduction for ‘Technological Innovation’45%12%
‘Deduction for R&D activities’Up to 75.6%Up to 42%
Research staff salaries+17%+37%
Investments in fix assets for R&D activities+28%+8%
Quota limit (max. aggregate deduction to be applied)Up to 90%Up to 50%

This tax shelter incorporates multiple benefits as it has been specifically designed to encourage innovative and disruptive ventures:

It contemplates a category that is not considered by the tax regimes of other neighbouring countries: the deduction for ‘Technological Innovation’.  It encompasses any technological advance in obtaining new products or production processes or the development of substantial improvements to existing processes, including first non-commercial prototypes and initial demonstration/pilot projects, including those related to animation and videogames. Hence, it allows for fiscal support to projects that would not qualify as pure R&D.

A wide range of projects can benefit from these deductions, regardless of the economic sector that would apply the technological improvement or the maturity/TRL of the project.

It has been especially designed for SMEs, as they can benefit both from the ‘deduction for technological innovation’ and a direct discount on Social Security contributions for the employees directly involved in the innovative venture (40% reduction in business contributions to the Social Security).

This smart combination (deduction accompanied by a reduction in Social Security contributions) applies to SMEs with labelled as ‘Innovative SME’ and results in a boost to the design and development of innovative projects within the company.

Gran Canaria not only offers technical resources, infrastructures/facilities and an ecosystem dedicated to R&D, but it also has the human resources necessary to undertake related projects. ‘Best in Gran Canaria’ by means of the Agency for the Economic Development of Gran Canaria (SPEGC) offers a ‘Support Service for Companies’ (SAE, it its Spanish acronym). It is a dedicated advisory service, aimed at local start-ups, companies and innovation professionals, but also at international projects that are looking for the ideal research base to test and validate their proposals.