Spanish Tax in the Canary Islands — IGIC, ZEC, Non-Resident Tax & REF Incentives 2026

IGIC (Impuesto General Indirecto Canario, Ley 20/1991) is the Canary Islands equivalent of mainland VAT, but with key differences. Standard rate: 7% (vs IVA 21%). Reduced rate: 3% (vs IVA 10%). Zero rate applies to basic necessities. On property purchases, new builds are subject to IGIC (not mainland VAT) plus AIEM (Arbitrio sobre Importaciones y Entradas en las Islas Canarias). Importantly, the Canary Islands are outside the EU VAT area — mainland IVA rules do not apply.

The Zona Especial Canaria (ZEC, governed by Real Decreto 1758/2007 and authorised by the EU as compatible state aid until 2027) offers a 4% corporation tax rate on IS (vs 25% standard mainland rate) for qualifying registered companies. Requirements: minimum investment (€100,000 in Gran Canaria or Tenerife; €50,000 on other islands), at least 5 permanent employees hired within the first 6 months, and activity in an approved sector (manufacturing, digital services, IT, logistics, R&D). A powerful incentive for genuine business relocation.

Resale properties in the Canaries are subject to ITPAJD at 6.5% — significantly lower than mainland rates and far below the Balearic Islands. New builds are subject to IGIC (6.5%, not mainland VAT). No AJD (mortgage tax) on new mortgages since the 2018 national reform applies in the Canaries as well. The Canary Islands also have lower plusvalía municipal (land value increase tax) than mainland urban areas.

Yes — IRNR (RDL 5/2004, LIRNR) applies nationally, including the Canary Islands. Non-residents pay: 19% (EU/EEA residents) or 24% (non-EU including UK nationals post-Brexit) on rental income or imputed income from empty properties. The Canary Islands special tax regime (REF) does not reduce or exempt non-residents from IRNR obligations. Model 210 filing deadlines are identical to mainland Spain.

The Reserva para Inversiones en Canarias (RIC, Art. 27 Ley 19/1994 REF Canarias) allows companies operating in the Canary Islands to deduct up to 90% of undistributed annual profits from the IS (corporation tax) taxable base, provided those profits are reinvested in Canary Islands assets within 3 years. Combined with the ZEC 4% rate, this makes the Canaries one of the most tax-efficient EU jurisdictions for genuine business operations.

You can be legally resident in the Canaries (via EU free movement or Golden Visa route) without triggering Spanish tax residency, as long as you spend fewer than 183 days in Spain and your centre of vital interests remains outside Spain. Critical point: the 183-day rule counts days in ALL of Spain — mainland plus Canaries plus Balearics together. Splitting time between the islands and the mainland does not reduce the day count; all Spanish territory counts as one.