For the uninitiated, the Canary Islands are an archipelago, located off the coast of Spain. Major islands in the archipelago include Tenerife, Gran Canaria and Fuerteventura, among others. The Islands are best known for their mesmerising beauty, beaches and natural attractions such as the Teide National Park and one of the tallest volcanoes in the world, Mount Teide in Tenerife. Naturally, it is a major tourist destination, with  a whopping 12 million visitors per year. You are likely to find people looking to retire in the Canary Islands, or relocate to the Islands in pursuit of calm and peace. But in the midst of this scenic paradise is brewing some interesting startup activity that we examine in this ecosystem report.

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Advantages of starting up in Canary Islands

We asked the team at SEOintheSUN what they thought were the main advantages of starting a company in the Canary Islands, and they summed it up for us, “We offer the best tax conditions in Europe, cheap labour, low cost of living, government funding for start ups and a great climate and surroundings to work. Apparently, the mild climate is the most appealing advantage (although it might seem irrelevant) and the cost of living, which is much more cheaper than in the European capitals, as well. Also, we have good technical conditions in regard of internet connections or other related services.”

Let us take a more detailed at each of these:

Tax incentives: This one’s no secret. The tax benefits of starting up in the Canary Islands are its biggest advantage. Canary Islands enjoys a different tax regime, operated by the Economic and Tax Regime of the Canary Islands (REF). Under this regime, companies are subject to a reduced tax rate of 4%, exemptions in the Canary Islands General Indirect Tax (IGIC) and Property Transfer Tax and Stamp Duty. Now compare this to the European average tax rate which rises to 23%, and you see what we’re talking about!

Low cost of living: As compared to the rest of Europe, the cost of living in the Canary Islands is much lower. And this is not due to the loss of technical and communication facilities, so all in all this is a great proposition for a startup. Low cost of living also translates to lower salaries, which are critical for startup in the initial stages.

Culture and leisure: This is perhaps not your first consideration when choosing a place to launch your startup, but the scenic beauty and rich culture of the Islands make it worth a mention. Many of the islands have a good mix of nationalities, so you may not necessarily feel like an outsider. And what better way to combat stress at work than an afternoon of surfboarding and cycling?

Disadvantages of starting up in Canary Islands

As mentioned earlier, the startup scene in the Canary Islands is still blossoming, and hence riddled with problems that a budding ecosystem is bound to fail.

Lack of access to private funding: One of the biggest disadvantages, this is a point echoed by SEOintheSUN as well, “It is difficult to access private investors and international networks.” While the government offers funding to startups and researchers, startups require large investments in order to scale, that are not available in the Islands. This forces startups to move elsewhere.

Lack of events and platforms: Networking and collaboration are both essential for a startup ecosystem to grow, but there are not many such platforms available for entrepreneurs to connect with each other and exchange ideas. Of course there are a few initiatives, as mentioned later in the article. There are also not many accelerators or incubators that propel startups to growth. Says team SEOintheSUN, “Although the atmosphere is changing step by step, we are still lacking the potential of contacts, events or platforms like they can be found in Madrid, Berlin or London.”

Lack of focus on global markets: A big thanks for this article is due to Google Translate, as almost all of the websites we visited for the article were in Spanish! Now, that may not be the biggest indicator of whether language is barrier in the Islands (some online sources indicated that a number of the major islands were inhabited by foreigners and language as such was not an issue), it does indicate a certain focus on the local markets. The internet is where most of the world lives, buys and spends, thus making most of the websites accessible in major languages in the world would certainly improve their visibility and outreach.

Small and isolated market: While low taxes and living costs may be tempting at first, startups will definitely want to move to a more global location, given the limited market that the Canary Islands offer. Also, since this is an island we are talking about, it is a bit far removed from the major startup destinations in Europe, which is a disadvantage for startup founders.

Tenerife is one of the Canary Islands, an autonomous region forming part of Spain and, therefore, of the European Union. As it is a fully integrated territory, the applicable legal system is that of Spain and the European Union. Moreover, its own special Economic and Fiscal Regime, entirely compatible with European regulations, o ers reduced taxation on company pro ts and on consumer goods as well as access to other incentives to business investment. Tax Incentives

Tax deduction for the production of material assets

This incentive o ers a 50% reduction in company tax, applicable to businesses producing agricultural, livestock, fishing and industrial goods.

Indirect Canary Islands Tax (IGIC)

This is similar to VAT but specific to the Canary Islands, with notably lower charges. Its standard rate is 7%.

Special taxes

Taxes on alcoholic drinks, tobacco, fuel and certain modes of transport are significantly lower than in the rest of the European Union.

IGIC in-depth (This information is under review. If you have doubts about invoicing with IGIC we suggest to get in touch with a tax advisor)

Differently, from mainland Spain, where Value-Added Tax (IVA in Spanish) is applied on product and services, the Canary Islands benefit from a special tax regime that allows business based in the islands to substitute IVA with IGIC. Its standard rate is 7%.

IGIC must be applied to business transactions within the Canary Islands, meaning to products and services sold to business and buyers in the archipelago.

You don’t have to apply IGIC if your business is based in the Canary Island but the buyer is based outside of the archipelago, which included mainland Spain and all the other countries.

This is important when you are invoicing to your clients around the world. If your business is based in the Canary Island and you are invoicing to a client based outside the archipelago, you should not charge IGIC.

Tax Incentives for Investment

The Canary Islands Investment Reserve (RIC). With this incentive, the tax burden can be reduced by up to 90% of the company’s pro ts, always provided that certain investments linked to the growth of the company are made.

• Deduction for investment in fixed assets. This means a reduction of company tax equivalent to 25% of the amount destined for the acquisition of fixed assets.

• Greater reductions in company tax in comparison with the general Spanish system, for investments and expenses in activities such as:

-RD&I (32%-45%) -National audiovisual productions (40%-45%) -International audiovisual productions (40%)

Spanish Inbound Manager Regime

In general terms, the individual applying for this regime should only be liable to Spanish Personal Income Tax (PIT) regarding the Spanish sourced income. In principle, income obtained abroad should not be subject to tax in Spain. However, all employment income should be considered as Spanish sourced income. The employee would have a flat tax rate of 24% until 600,000 euros income and the Spanish Wealth Tax should only be applicable for the assets and rights located and that can be executed in Spain. The time period to apply for the inbound tax regime is 6 months since the date in which the employee has started to work and this regime should be applicable from the year in which the individual obtains the Spanish tax residency and in the following 5 years.

VideoLean (@videolean ): As the name suggests, the app is for making great-looking videos using a set of templates and processes. It was founded in 2012 by David Macias Alejandro. The app now has more than 100,000 users and is used in 140 countries. The company has received 70,000 euros from the National Innovation Company (ENISA) and 100,000 euros from SODECAN, a public corporation of Canary Islands government.

Promineo Studios (@promineostudios): The developer of mobile games and apps was founded by Isidro Quintana (@isidro_quintana), and has gone on to raise a substantial amount of funding. The startup is the winner of the sixth edition of TF Invest, and aims to introduce its original games to a global audience.

Voiver (@voiver_com): A voice-over marketplace, Voiver was founded by Gerardo Diaz Polaino (@gerardodp) in 2014 and is a bootstrapped venture.  It has been received well by customers who state that it is easy-to-use and the quality of recordings is good too. The startup has been featured by ProductHunt and BetaList.

Welovroi (@Welovroi): Founded by Kilian Barera (@kilianbarrera) and Alejandro Gonzalez (@AlejandroGQ), it is an intelligent dashboard for Digital Marketing Managers who need to monitor, measure, report and calculate the return on investment (ROI) of their online strategies. Welovroi uses data sources (Adwords, Advertising, Social Media, etc.) and saves the key performance indicators (KPIs) that are important to you and displays them in any digital device in real time.

GrapheneDB (@GrapheneDB): A Fully-managed cloud hosted Neo4j graph databases. It stores data in graphs, the most generic of data structures, and is especially suited for datasets where relationships are relevant. Available on AWS, Azure and Heroku, it was founded by Alberto Perdomo (@albertoperdomo) and Juanjo (@juanjoandres).

Quaderno (@quadernoapp): Founded by Carlos Hernandez (@polimorfico), Quaderno makes invoicing and tax handling a breeze. It organizes all different payment streams into one transparent, easy-to-understand platform.It works with payment gateways and automatically sends all the customers invoices.

Squireapp (@squireapp): Squire allows to watch movies and shows instantly on any Apple device. Easy to install and use.

ComparaDentistas (@comparadentista): It is the leading service for cost comparisons of dental treatments in Spain. They help patients get cheaper prices for dental treatments and dental offices get more customers. It was founded by  Guido Kloess (@GuidoKloess).

Investment in Canary Islands

TF Invest Investment Club: An initiative of the Scientific and Technological Park of Tenerife (PCTT), it is creating a network of investors and entrepreneurs in Tenerife. The startups must be technology based and have a global appeal. PCTT helps entrepreneurs establish connect with potential investors, and grow their enterprise.

Sodecan (@sodecan): A public corporation set up by the Government of Canary Islands in 1983, it provides loans to early stage tech-based startups. The loans range from 10,000-100,000 euros. The companies are given a grace period of 5 years to repay the loan. Companies with a private investor can approach SODECAN for funding at later stages too. Some of the startups it has funded include VideoLean, Promineo Studios and ComparaDentistas.

Red UNIBAN (@reduniban): University Business Angel Network is an initiative of the University of La Laguna (ULL) managed by its foundation (@fg_ull). It is a place where startups and investors can learn, meet each other and get mutual benefit. Its main goal is to create the culture of investment in startups, especially those who come from the university context, as well as showing the best investment opportunities.

RECABA: The Canary Islands Business Angels Network is managed by PROEXCA (@proexca). It is focused on contacting private investors from the network with innovative investment projects that have gone through a strict selection procedure, collaborating with national and international experts. It also aims guaranteeing the project’s quality and providing the best information about them.

WhyTenerife (@WhyTenerife): It is a project aimed at promoting the economic, social and cultural development of Tenerife through implementing activities that favour the creation of a solid business and commercial base on the island, driving growth in terms of development and employment.  It is the one point of contact offering a full range of support and services to quickly established and develop your business in Tenerife.

SPEGC (@SPEGC): The Organisation for the Economic Promotion of Gran Canaria (SPEGC) is a business entity fully owned by the Cabildo de Gran Canaria and dependent on the Department of Economic Development, Public Works, Infrastructures and Transport. The mission of the SPEGC is to promote economic and entrepreneurial activities that contribute to the island’s development and expansion.

Accelerator Program in the Canaries

YuzzTenerife (@YuzzTenerife): In association with coworking space Dyrecto Consultores, YUZZ is a five-month accelerator program that provides participants access to mentors, working space and capital, among other things. At the end of the program, the best startups take home prize money ranging 10,000 euros to 30,000 euros.

LaunchTF (@fg_ull): The first pre-acceleration program of Canary Islands. This is an initiative that consists of an intensive 2 month and has a huge number of quality mentors.

 Canary Islands Coworking Spaces

Surf Office (@surfoffice): The coworking space came into being when its founder, Peter Fabor (@faborio), realised how he longed to work under the sun and take breaks to go surf-boarding. He launched Surf Office in Gran Canaria for those who crave for calm and  a beach to surf, close to their workplace, as opposed to a regular office. The coworking space is a 10-room property, that professionals from all over the world visit, as a welcome change from their humdrum work routine. It offers all facilities that other coworking offices do; team and individual working spaces, high-speed internet and access to a kitchen.

Dyrecto Consultores (@DyrectoConsult): Dyrecto Business Centre, in Santa Cruz de Tenerife, provides startups with a host of personalised services such as financing, marketing, help with Canary taxation, among other things. The coworking space has a fully equipped office, landlines, printers, high speed internet facilities and conference rooms. In addition to being a coworking space, it also organises startup events such as Mentor Day.

Coworking in the Sun (@seointhesun): Billed as a “workation”destination in Tenerife, Coworking in the Sun is an initiative of SEOintheSUN, that offers more than the average coworking space. Entrepreneurs and startups can also sign up for their co-living facilities, online marketing classes and a myriad activities such as Spanish lessons, adventure sports and Salsa lessons! Of course, they are fully equipped with office supplies, internet, meeting rooms and IT support.

Paletexpress (@paletexpress): It is a shuttle for projects and ideas, a magnet for talent and technologies, all based on our spaces, style and a different environment. A way of working that allows talented professionals and entrepreneurs, small businesses and multinational employees from different sectors to share the same workspace, both physical virtually and to develop their professional projects in an independently or collaboratively way as they want.

Franja47 (@Franja_47): It is a coworking space in Santa Cruz de Tenerife, designed for professionals seeking a quiet environment but live where they can develop their projects and join other initiatives.

Coworking Nomad (@coworkingnomad): One of the first coworkings in Santa Cruz de Tenerife. Managed by the founder of @ucrowdfunding.

Events and Organisations in Canary Islands

Tenerife Invierte: Tenerife Invierte, now known as “TF Gold Invest”, is organized by the Island Council Tenerife, through PCTT. The event aims to discover and develop innovative startups, by providing them with funding.

Mentor Day (@mentordaytfe): A non-profit organization, Mentor Day is a monthly meeting of entrepreneurs with a focus on solving problems such as funding, training, taxation, partnerships, etc. It takes place at Dyrecto Consultores. Eight startups present their companies and receive feedback from startup mentors.

FGULL (@fg_ull): The General University Foundation (FGULL) creates a link between academic and social fields. Its aim is to promote closer relations between the University and its socio-economic environment. It organises courses on a variety of topics for students and entrepreneurs. FGULL also offers Spanish courses which combine face-to-face classes with online classes.

The other important startup events include Tenerife Startup Weekend (@SWTenerife) and Gran Canaria Startup Weekend(@SWGranCanaria), the next editions of which will be held in March 2016.

Mentor Day will also be carrying out an acceleration program between September 3 and 7 in Santa Cruz de Tenerife.

This program will be adapted to the needs of entrepreneurs with projects “that contribute innovative models of high impact” in society related to the solidarity economy, welfare and cooperative, responsible innovation, social development, social inclusion and social impact, among others.

The selected projects will participate in an open innovation process to launch their initiatives with guarantees of success. For this, the participants have the support of 70 selected specialized experts from more than 360 collaborators who will review each project individually.

Participants will also access the network of Mentor Day ambassadors in 30 regions; they will be accompanied for a year by a selected mentor from the largest network in the world — Youth Business International; they can win any of the more than 60 prizes that are given; and receive free advice and information on taxation, among many other issues.

Mentor Day Canarias has the collaboration Cátedra CajaSiete of Social and Cooperative Economy of the ULL, of Citi, Amazon, Accenture, Youth Business Spain, and Youth Business International, Red CIDE, Endesa and Microsoft.

How to apply

1. Fill in the registration form

In the registration, which is completely free, identify all your needs well so that we can select the appropriate experts to cover them.

2. Do it ASAP

The sooner you register, the more chances of being chosen.

The places are very limited (15 maximum per program).

We accept the requests as they comply with all the conditions..

3. The stage of your proyect

Additionally to the date of application, we also take into consideration the current stage of your proyects’ business lifecycle, including innovation and growth. The further along, the better.

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