TRIANGULAR OPERATION

Accelerate your business with these expert tips about "Operation Triangle". Analyse and discover this TIP!

A triangular transaction is a commercial transaction involving several companies in at least three different geographical locations, with the goods being transported directly from the country of the selling company to the country of the buying company, but the flow of invoices, payments and documents passing through an intermediary company. 

This operation is increasingly common in international trade and is taxed at only 4% for companies established in the Canary Islands. 

Assumptions of triangular operations include typical activities of wholesalers buying goods in one place and selling them in another, freight forwarding companies acting as intermediaries and companies handling their own goods that do not pass through the archipelago. It is important that the operations are actually and materially carried out from business establishments located in the region of interest, in this case the Canary Islands.

What are the benefits of the triangular operation when it is carried out from the Canary Islands?

When the triangular operation is carried out from the Canary Islands, several tax benefits can be obtained, among them:

1. Reduced taxation: Triangular operations can benefit from a reduced taxation of 4% for companies established in the Canary Islands.
2. Advantages of the Canary Islands Special Zone (ZEC): Companies located in the ZEC can benefit from a series of tax advantages, such as reduced taxation of 4% on profits obtained from activities carried out within the zone.
3. Benefits of the low tax regime: The Canary Islands have a low taxation regime that offers tax advantages to companies that carry out economic activities in the archipelago.

In general, the triangular operation from the Canary Islands can be an interesting strategy to take advantage of the tax benefits of the area, provided that the necessary requirements and conditions are met.

How can an entrepreneur take advantage of the triangular operation from the Canary Islands?

An entrepreneur in the Canary Islands can take advantage of the triangular operation to obtain tax benefits in his international trade operations.

YOU CAN DO THIS BY FOLLOWING THE STEPS BELOW:

1. Identify the countries you want to do business with and look for potential intermediaries or buying companies in those countries.
2. Search for freight forwarding companies in the Canary Islands that can act as intermediaries in the triangular operation. It is important to verify that the forwarding company has the necessary experience and capacity to carry out this type of operation.
3. Agree with the freight forwarder the terms and conditions of the triangular transaction, including the price of the goods, delivery times and payment terms.
4. Ensure that the triangular operation complies with all applicable tax and customs requirements in the countries involved in the operation.
5. Take advantage of the tax benefits offered by the Canary Islands Special Zone (ZEC), which establishes a reduced tax rate of 4% for companies established in the Canary Islands that carry out triangular operations.

In short, an entrepreneur in the Canary Islands can take advantage of the triangular operation to carry out international trade operations efficiently and profitably, taking advantage of the tax benefits offered by the ZEC. It is important to have the right advice and to ensure compliance with all applicable regulations.

Triangular transactions are those involving several companies (manufacturer/seller, intermediary, buying company) located in at least three different geographical locations since the fiscal point of view.

Features

The peculiarity of this operation is that the goods are transported directly from the country from the selling company to the country of the buying company, but the flow of invoices, payments and documents goes directly through the intermediary company (owner of the transaction), as it is not in the buyer's interest to have direct contact between buyer and seller.

As a result of the globalisation of markets, the technification of transport and the development of new technologies, this type of operation is becoming more and more frequent in the world. international trade and enjoys a taxation rate of only 4% for companies established in the Canary Islands.

Triangular transaction scenarios

• TYPICAL WHOLESALE ACTIVITY

He buys goods in one place and sells them in another. He brings goods to the Canary Islands from Africa, for example, and then takes them to South America.

• FORWARDING COMPANY

It is not the owner of the goods, but acts as an intermediary for other companies, assuming less risk: planning, processing and managing the transport of the goods between the customs office of departure (in the country of origin), the customs office of arrival (in the country of destination) and the intermediate offices (if any), so that the operation is as safe and profitable as possible.

This is what is known as a freight forwarding company, and there is no difference in criteria here either, since it can operate from the Canary Islands under the regulations of the ZEC without any restrictions and irrespective of whether the products pass through the islands or not. 

• COMPANIES HANDLING THEIR OWN GOODS THAT DO NOT PASS THROUGH THE ARCHIPELAGO

The disparity of views between central and regional governments arises in cases where the company involved in the movement and distribution of goods is also the owner of the goods.

The Directorate General for Taxation does not see clearly that a company can benefit from the advantages of the ZEC when its activity in the Canary Islands is limited to the remote management of the transport and distribution of products which it owns and which will not pass through the Canary Islands.

It does not seem to make much sense that it is the ownership of the assets that makes the difference between being a ZEC entity and not being a ZEC entity. It is not in vain, and over and above the ownership of the assets, that the management of transport and distribution is actually carried out with means and personnel in the Autonomous Community of the Canary Islands.

• OPERATIONS PHYSICALLY CARRIED OUT IN THE CANARY ISLANDS

Example of an airline that flies from the Canary Islands with crews resident in the Canary Islands. There are operations in between, for example, those in which the crew is made up of workers contracted in the Islands but on routes that do not include the Canary Islands or those in which the flight departs from or comes to the Islands but with crew from other places.

Can airlines benefit from the lower taxation in the latter cases or not? This is what the tax authorities need to clarify!

For corporate income tax purposes, the profit of a company engaged in triangular operations will be considered to be resident in a region (e.g. the Canary Islands) if: it has been effectively and materially carried out from commercial establishments located in the Islands. By effectively and materially carried out in the Canary Islands we mean that the operations have been organised, directed, contracted and invoiced in the archipelago.

Therefore, the Canary Islands businessman who wants to carry out triangular operations has a favourable treatment from the fiscal point of view, whether from the ZEC or other low tax zones.