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Spain

The regulatory reforms to the economic and tax regime of the Canary Islands are still awaiting approval by the Spanish authorities. When the process, which started in 1991, is finally completed, the Canary Islands Special Zone will take effect within the framework of the EU, and will remain operative until at least the year 2024. One of its objectives is the creation and development of a Canary Islands financial market.

The main tax advantages behind the development of such a financial market lie in the Canary Islands Zone's tax burden (1% corporate tax) and its freedom from the withholding obligations over capital income and the application of EU tax directives and Spain's tax treaties.

The Canary Islands Zone will also offer a number of exceptions to Spain's general financial law. Thus, credit entities will be required to have a minimum level of capital, represented by registered shares. Their incorporation will be subject to the same requirements as the creation of private banks in Spain, including prior authorization. The Bank of Spain will be in charge of the inspection, supervision and financial control of these entities. However, the law will reinforce the current standard of bank secrecy, which will apply to credit entities except when information regarding their transactions or clients is sought in the course of criminal proceedings, or is necessary for the preparation and filing of the consolidated accounts of the group to which they belong. The credit entities will also be exempted from the obligation to comply with cash and investment ratios.

In addition, the new regulatory scheme contemplates the creation of insurance, reinsurance and capitalization companies, which will generally be subject to normal Spanish law, though certain exceptions will apply, among which are the absence of minimum share capital requirements. As in the case of credit entities, the creation of insurance companies in the Canary Islands Zone will be subject to prior authorization, and their operations will be subject to the supervision, inspection and control of the Ministry of the Economy and Revenue.

Finally, the creation of a stock exchange is also planned, to operate exclusively in the Canary Islands Zone, as well as the creation of official secondary markets for derivatives or raw materials, both financial and non-financial, as well as options and futures markets.

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