IGIC instead of IVA: 7% standard rate (vs 21% on the mainland) — plus special rates from 0% to 20%
IRPF Canaries: Separate scale with 7 brackets from 9% to 26% — lower than most Spanish regions
29 regional deductions: Rent, health, children, investments — many go unclaimed
REF benefits: RIC (up to 90% of profits tax-free if reinvested), ZEC (4% corporate tax), 50% production bonus
Tax return 2026: Filing period 8 April – 30 June 2026 (for tax year 2025)
Note: This article is an overview — not tax advice. For individual questions, consult a local gestoría or tax adviser.
IGIC: The Canarian Sales Tax
The Canary Islands sit outside the EU VAT area. Instead of Spain's IVA (Impuesto sobre el Valor Añadido), the IGIC — Impuesto General Indirecto Canario — applies here. The key advantage: the standard rate is just 7%, compared to 21% IVA on the Spanish mainland.
| Tax | Canary Islands Rate | Mainland Spain Rate | Notes |
|---|---|---|---|
| IGIC / IVA (standard VAT) | 7% | 21% | Reduced rates: 3%, 0% |
| Corporate Tax (standard) | 25% (standard) 4% (ZEC) | 25% | ZEC requires local jobs/investment |
| IRPF (income tax, top rate) | ~47–50% | ~47–54% | Progressive; regional tranche varies |
| ITP (property transfer tax) | 6.5% | 6–10% (varies by region) | Second-hand property purchases |
| Stamp Duty (AJD) | ~1% | 0.5–1.5% | New-build purchases and mortgages |
The IGIC system has six rates. The zero rate (0%) covers staple foods such as bread, milk, eggs, fruit and vegetables, as well as books and periodicals. The reduced rate of 3% applies to industrial, textile, transport and cultural products. The general rate of 7% covers everything not categorised elsewhere. Higher rates of 9.5% and 15% apply to specific goods, and a special rate of 20% applies to tobacco. New for 2026: a 1% rate on fuel imports.
IGIC exemptions include medical services, education (from nursery to university), postal services and insurance. For freelancers and business owners, this means invoices show IGIC rather than IVA. The simplified regime (régimen simplificado) is available for smaller businesses. IGIC returns are filed quarterly with the Canarian tax authority.
IRPF: Income Tax in the Canary Islands
Spain's income tax IRPF (Impuesto sobre la Renta de las Personas Físicas) consists of two parts: a national rate that applies across Spain, and a regional rate set by each autonomous community. The Canaries have their own scale with seven brackets.
The regional scale for 2025/2026 starts at 9% for the lowest incomes and rises through 10.5%, 14%, 18.5%, 23.5% and 24% to a maximum of 26% for the highest earners. For comparison: Madrid's top rate is 20.5%, Catalonia's is 25.5%. The Canaries sit in the upper mid-range — but the numerous deductions make the difference.
You are considered tax resident in the Canaries if you live there for at least 183 days per year. Only then does the regional scale apply, and only then can you claim Canarian deductions.
29 Regional Deductions — Most Go Unclaimed
The Canary Islands offer one of the most extensive systems of regional tax deductions in Spain. For tax year 2025 (filed in 2026), 29 different deductions are available. The most important at a glance:
Rent: 24% of rent paid for your main residence, up to €740 (€760 if under 40 or over 75). Healthcare: 12% of certain medical expenses. Donations: 10–20% for charitable donations or heritage preservation, up to €150 each. Investments: 20% for investments in Canarian companies (max €4,000), 30% in special cases (max €6,000). Plus deductions for childcare, birth/adoption, dependants, study costs and more.
Many of these deductions go unclaimed by newcomers — simply because they are not widely known. A good tax adviser (asesor fiscal) or gestoría will know the details.
REF: The Canarian Economic and Tax Regime
The Régimen Económico y Fiscal (REF) is the foundation of the Canarian tax landscape. It was created to offset the disadvantages of insularity and ultra-periphery, and offers investment incentives unique in the EU.
RIC (Reserva para Inversiones en Canarias): Businesses and self-employed individuals can set aside up to 90% of undistributed profits tax-free — provided they reinvest the money in the Canaries within three years (e.g. property, equipment, business assets). This is the single most powerful benefit in the Canarian system.
ZEC (Zona Especial Canaria): Companies meeting certain requirements (job creation, minimum investment) can access a corporate tax rate of just 4% (Gobierno de Canarias) — compared to Spain's standard 25%. The ZEC currently runs until the end of 2026.
Production bonus: Those producing physical goods in the Canaries (agriculture, industry, fishing) receive a 50% reduction on the corresponding tax liability — for both corporate tax and IRPF.
Investment tax exemptions: Initial investments in the Canaries may be exempt from transfer tax (ITPAJD) and IGIC.
Practical Tips for Expats and Autónomos
Gestoría or Asesor Fiscal: Spain is not a country where you do your own tax return — especially not as a newcomer. A gestoría (administrative services provider) or asesor fiscal (tax adviser) costs €50–150 per quarter and pays for itself many times over.
Modelo 130: Autónomos make quarterly advance income tax payments via Modelo 130 (20% of quarterly profit). These are offset against the annual return.
Modelo 420: The quarterly IGIC return for the self-employed — the Canarian equivalent of the mainland's IVA Modelo 303.
Tax year = calendar year: The Spanish tax return (Renta) is filed the following year. The 2026 campaign for tax year 2025 runs from 8 April to 30 June 2026.
Double taxation treaties: The UK, Germany, Austria and Switzerland all have treaties with Spain to avoid double taxation. Anyone becoming tax resident in the Canaries must declare worldwide income there — but can claim credits under the relevant treaty. Always consult a tax adviser in both countries before relocating.
Bottom Line: Cheaper Than You Think — If You Do It Right
For newcomers from northern Europe, the Canarian tax system is significantly more favourable than expected in many areas. 7% IGIC instead of 21% IVA, moderate IRPF rates, 29 deduction options and the REF instruments make the Canary Islands one of the most tax-efficient locations in the EU — legally and transparently. With a good tax adviser and knowledge of the rules, the savings are substantial. Without one, you leave money on the table.
Disclaimer: This article is for general information only and does not constitute individual tax advice. Tax rules may change. For binding information, consult a licensed gestoría or asesor fiscal in the Canary Islands.