Taxes

Taxes in the Canary Islands

The Canary Islands have a special fiscal regime (REF — Régimen Económico y Fiscal) that significantly differentiates them from mainland Spain. The archipelago is part of the EU customs territory but is outside the EU VAT area.

IGIC vs. IVA (VAT)

Instead of IVA (21% in mainland Spain), the Canary Islands apply IGIC (Impuesto General Indirecto Canario) with a general rate of 7%, significantly lower. Reduced rates of 3% and 0% apply to essential products, basic food, medicines, and transport. This is the most visible tax difference for residents and visitors.

IRPF (Income Tax)

Income tax is shared between the State and the Autonomous Community. Canary Islands tax rates are similar to mainland rates but with some specific deductions. For 2024, brackets range from 19% to 47.5% for high incomes. Tax residents (spending more than 183 days per year in Spain) are taxed on their worldwide income. Non-residents pay a flat 24% on Spanish-sourced income (19% for EU/EEA residents).

Property Taxes

• ITP (Property Transfer Tax): 6.5% for resale properties. This is the main tax on second-hand property purchases.
• IGIC (New Build): 7% for new properties from a developer.
• IBI (Property Tax): Annual municipal tax, typically 0.4-1.1% of the cadastral value. Paid to the local town hall.
• Plusvalía: Municipal tax on the increase in land value when selling. Calculated based on the cadastral land value and years of ownership.
• Non-resident property tax: Non-resident property owners pay a deemed income tax of 24% on 1.1% or 2% of the cadastral value annually.

ZEC (Canary Islands Special Zone)

The ZEC is a low-tax regime for companies establishing in the Canary Islands, offering a reduced Corporation Tax rate of 4% (compared to the standard 25%). To qualify, companies must create jobs, invest a minimum amount, and operate in eligible sectors. The ZEC is approved by the EU until 2027.

Other Tax Benefits

• No wealth tax (Patrimonio) in the Canary Islands (unlike some mainland regions).
• Reduced Succession and Gift Tax for residents.
• Rental income from long-term rentals is eligible for a 60% reduction in taxable income.