Canary Islands Tax Guide 2026:
Lower Taxes, Special Regime
The Canary Islands operate a unique tax framework — separate from mainland Spain — with IGIC instead of VAT, ZEC's 4% corporate tax, and special deductions unavailable anywhere else in the EU.
4%
ZEC corporate tax (vs 25% standard)
7%
IGIC standard rate (vs 21% VAT)
90%
RIC profit reinvestment deduction
24%
Beckham Law flat personal rate
How the Canary Islands differ from mainland Spain
Four structural advantages built into the Canary Islands' constitutional tax framework (REF).
IGIC instead of VAT
The Canary Islands are outside the EU VAT area. IGIC (Impuesto General Indirecto Canario) applies at 7% standard rate — vs 21% on mainland Spain. Many services carry 0% IGIC.
ZEC: 4% corporate tax
The Zona Especial Canaria offers a 4% corporate income tax rate for qualifying entities — the lowest statutory corporate rate in the EU, fully state-aid approved.
RIC: reinvestment deduction up to 90%
The Canary Islands Investment Reserve (RIC) allows businesses to deduct up to 90% of profits from the tax base, provided those profits are reinvested in qualifying assets within the islands.
REF — the overall framework
The Régimen Económico Fiscal de Canarias (REF) is the constitutional framework behind all Canary Islands tax benefits. It has existed since 1994 and is protected by EU treaty.
The ZEC: 4% Corporate Tax
The Zona Especial Canaria (ZEC) is a special low-tax area within the Canary Islands with EU state-aid approval. Companies incorporated within the ZEC pay only 4% corporate income tax (IS)on their qualifying income base — compared to Spain's standard 25%.
The ZEC has operated since 2000 and is managed by the AZSEC consortium. It has been renewed multiple times and currently operates under an extension approved until at least 2027. It is fully compatible with EU treaty obligations and Spain's network of 90+ double taxation agreements.
ZEC is open to companies in a wide range of sectors: digital services, e-commerce, professional services, manufacturing, logistics, financial services and more. Real estate activities are generally excluded.
ZEC requirements at a glance
For individuals — your tax position
Three different tax regimes apply depending on your residency status and circumstances.
Spanish Tax Resident (IRPF)
- Progressive 19-47% on worldwide income
- Canary Islands regional deductions apply
- RIC deductions if you invest in the islands
- File annual Declaración de la Renta
Beckham Law (IRPF Special)
- 24% flat rate for 6 years
- Only Spanish-source income taxed
- Apply via Modelo 149 within 6 months
- Compatible with ZEC company structure
Non-Resident (IRNR)
- 19% (EU/EEA) or 24% on Spanish-source income
- Rental income via Modelo 210 (quarterly)
- Capital gains at 19%
- No worldwide income declaration
IGIC vs Spanish VAT
The Canary Islands use IGIC instead of Spanish IVA (VAT). Rates are significantly lower, providing a structural cost advantage for businesses and consumers.
| IGIC rate | Applies to | Equivalent mainland VAT |
|---|---|---|
| 0% | Basic foods, medicines, books, public transport | 0% / 4% |
| 3% | Certain professional services, cultural events | 10% |
| 7% | Standard rate — most goods and services | 21% |
| 9.5% | Certain luxury goods | 21% |
| 15% | Tobacco, alcohol (special rate) | 21% |
* IGIC applies to supplies in the Canary Islands. Exports to mainland Spain or EU are treated as zero-rated for IGIC but may trigger VAT obligations elsewhere.
Frequently asked questions
Do I pay VAT or IGIC in the Canary Islands?
IGIC. The Canary Islands are not part of the EU VAT area. The standard IGIC rate is 7% (vs 21% VAT on mainland). Some services carry 0% IGIC. Businesses in the Canary Islands that supply to mainland Spain or the EU may still need to deal with VAT on those transactions, depending on the nature of the supply.
Can a foreign company benefit from ZEC?
Yes. A foreign company can incorporate a ZEC entity in the Canary Islands. The entity must have real economic activity there (at least 1 employee) and meet the €100,000 minimum investment requirement. The ZEC entity is then subject to Spanish corporate law with 4% IS on its qualifying income base.
I receive rental income from a Canary Islands property. How am I taxed?
Non-residents pay IRNR via Modelo 210: 19% if EU/EEA resident, 24% otherwise. You must file quarterly if the property generates income. If you are Spanish tax resident, rental income is included in your IRPF return. Canary Islands residents benefit from regional deductions. You must also consider local IBI (property tax) regardless of residency status.
Does the Beckham Law apply in the Canary Islands?
Yes. The Beckham special IRPF regime (Art. 93 LIRPF) applies throughout Spain, including the Canary Islands. You pay 24% flat on employment and professional income up to €600,000 for 6 years. This can be combined with ZEC for maximum tax efficiency: ZEC pays 4% corporate tax; you as director/employee pay 24% personal tax under Beckham.
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