RESIDENCE TAX CANARY ISLANDS

Home » INTERNATIONAL TAXATION » SPAIN TAX » Comprehensive Guide for Residency and Tax Benefits in the Canary Islands

 

Comprehensive Guide for Residency and Tax Benefits in the Canary Islands

 

Table of Contents:

 

  1. Comprehensive Guide for Residency and Tax Benefits in the Canary Islands
  2. The Canary Islands: Choosing the Right Island for your Residency
  3. How to Obtain Residency in the Canary Islands, a comprehensive guide
  4. NIE or Foreigner Identification Number
  5. NIE BLANCO and NIE VERDE
  6. EMPADRONAMIENTO
  7. SEGURIDAD SOCIAL or SOCIAL SECURITY
  8. Residence Taxation and TAX Benefits in the Canary Islands
  9. Taxation in Spain
  10. Tax Advantages in the Canary Islands
  11. Special Tax Regimes (Beckham Law)
  12. Facilitated Tax Regime for Special Zone or ZEC Companies
  13. RIC or Reserva Inversiones de Canarias
  14. General Indirect Tax or IGIC
  15. Tax Regimes for Individuals
  16. TAX Advantages for Retirees
  17. Contacts for Comprehensive Guide for Residency and Tax Benefits in the Canary Islands

 

 

 

We have already seen in detail how to move to live and change tax residence in Spain with a guide to residency, NIE (Foreigner Identification Number), and empadronamiento (registration at the local town hall), and a guide to taxation and fiscal matters, but let’s look in detail at this

 

Comprehensive Guide for Residency and Tax Benefits in the Canary Islands.

 

This in-depth analysis is the result of professional expertise and years of direct life and work experience in the Canary Islands. Without this, a high-value support could never be provided to global clients who need to analyze and compare different jurisdictions, as we have been doing for many years.

 

 

 

The Canary Islands: Choosing the Right Island for your Residency

 

The Canary Islands archipelago is one of the autonomous communities of Spain located off the northwestern coast of Africa. It comprises 7 main islands, along with several smaller ones, all of volcanic origin. The main islands are Tenerife, which includes La Palma, La Gomera, and El Hierro, and Gran Canaria, which includes Fuerteventura, Lanzarote, and La Graciosa.

 

These islands are often referred to as the “Islands of Eternal Spring” because they boast a pleasant climate throughout the year. However, in winter, Tenerife and Gran Canaria are preferred due to being warmer and sunnier.

 

Each island has its own unique characteristics. While they are all beautiful and fascinating from a tourist perspective, relocating to live there requires considering other factors based on individual lifestyle and relocation needs.

 

In more detail, the largest islands are:

 

TENERIFE, with nearly 930,000 inhabitants and over 2,000 square kilometers, is the largest of the islands. Santa Cruz de Tenerife is the capital city of both the island and the province. Another city of interest in the north is Puerto de La Cruz, while the south is more touristy, with a better and warmer climate, especially in winter. Famous areas and beaches include Playa de Las Américas with bays popular among surfers, Los Cristianos, Costa Adeje, and El Médano, famous for kite and windsurfing. The Arona municipality, in particular, attracts a large number of Italians who have relocated there. In the center of the island stands Mount Teide, at 3,715 meters high, often snow-capped, and surrounded by a spectacular natural park, attracting visitors, hikers, and cycling enthusiasts.

 

GRAN CANARIA has 855,000 inhabitants and covers an area of 1,560 square kilometers. Its capital is Las Palmas. This beautiful and lively city, with almost 400,000 inhabitants, includes the stunning Las Canteras Beach, attracting both surfers and young sports enthusiasts fond of beach volleyball and beach tennis.

 

Las Palmas, the capital, is highly sought after for its beauty, vibrancy, and tranquility, making it a coveted destination for those who can work online or retirees.

 

In the center of the island lies Pico de Las Nieves, reaching 1,956 meters in height. In the southern part, there are more touristy and renowned places with golden beaches, such as the famous dunes of Maspalomas, Playa del Inglés, Puerto Rico, and Puerto Mogán. These areas also concentrate workers in the tourism sector.

 

LANZAROTE covers 845 square kilometers and has a population of 155,000 people. It boasts incredible landscapes of lava rocks, expanses of cacti, interspersed with coves of light or golden sand and azure waters. It is here that the local artist César Manrique transformed and enhanced many natural sites, skillfully combining art with the natural landscape of the desolate and lunar-like scenery.

 

FUERTEVENTURA, with almost 1,660 square kilometers and nearly 120,000 inhabitants, is beloved by windsurfers and kitesurfers for its almost constant wind, particularly in some areas of Corralejo and Costa Calma. It features truly spectacular marine landscapes and less crowded areas. Its main centers are Morro Jable and Corralejo.

 

The smaller islands, EL HIERRO, LA GOMERA, and LA PALMA, are less crowded and less targeted by tourists, suitable for those seeking natural beauty in quiet and unspoiled places. However, job opportunities are scarce, and services and infrastructure are less prevalent.

 

The larger islands, Tenerife and Gran Canaria, offer more services (including hospitals equipped for every need), more entertainment options, and more job opportunities. Additionally, they have a better winter climate compared to Lanzarote and Fuerteventura, which are more exposed to winds.

 

The healthcare system is of a good standard, with mostly free public healthcare for residents who contribute to Social Security. Retirees can benefit from it through the issuance of the S1 form from their country of origin.

 

However, only Tenerife and Gran Canaria have healthcare facilities with a wide range of services and specialties, as well as hospitals equipped for various conditions and surgeries. On the other islands, there are only emergency facilities or facilities with some specializations. In case of need, transfer to one of the larger islands is necessary, which is an important factor to consider when choosing where to relocate, especially for retirees or those with specific healthcare needs.

 

It should be noted that the economy of the islands is mainly based on tourism, which offers relatively low salaries.

 

For those looking for work and lacking a solid foundation in Spanish or unwilling to consider starting their own business, these may not be the best destinations. Most job offers are in the tourism sector but often limited to seasonal employment and underpaid. Job search websites such as Milanuncios, Jobatus, Jobrapido, Infojobs, as well as platforms like LinkedIn and social media, can be useful.

 

The islands are certainly more appreciated by freelancers, digital nomads, or retirees looking to relocate.

 

Unfortunately, like in other European countries and many parts of the world, rental costs are rising, which is one of the primary elements of the cost of living to consider in relation to one’s income before planning a relocation.

 

Monthly rental costs generally range from 600 to 700 euros for small apartments or in decentralized areas, while average prices start from 800 for small apartments or from 1000/1200 for slightly larger and more central apartments. Prices below 600 euros may be found in peripheral areas and for essential housing. It is advisable to check, for example, on Idealista, the average rental prices in relation to the Canary Island of interest and the area, as they vary greatly.

 

For example, the Los Cristianos and Playa de Las Américas areas in Tenerife, being highly touristy, are more expensive than the capital, Santa Cruz, while Puerto de La Cruz offers intermediate prices between the two.

 

Generally, houses do not have heating and often not even air conditioning.

 

Restaurant prices vary, and set menus can be found starting from 10 euros, while prices increase in medium or luxury restaurants.

 

Supermarkets widespread on the islands like Mercadona offer a wide variety of products and good quality at competitive prices, sometimes even lower than in Italy. Supermarkets such as Spar, Superdino, and Hiperdino are also common for quick shopping.

 

The level of safety on the islands is good, with essentially only incidents of petty crime, especially thefts, in the most touristy and crowded areas. Be cautious with your wallets!

 

Of the over 2 million inhabitants of the Canary Islands, 13% are foreigners. The Italian community is one of the largest, with nearly 50,000 registered Italians who have decided to relocate to live in the Canary Islands, about 30,000 in Tenerife, others in Gran Canaria, and a less significant number on the other islands. In addition, there are unregistered Italians and a significant number of hundreds of thousands of European and NON-EU tourists who come to visit.

 

 

How to Obtain Residency in the Canary Islands, a comprehensive guide

 

We will now go through a series of steps to be taken and documents to be obtained for moving to live in the Canary Islands, similar to those for those who decide to move to Spain, familiarizing oneself with the terms used in the Spanish language.

 

NIE or Foreigner Identification Number

In Spain, it is necessary to obtain the NIE or Foreigner Identification Number, a unique and exclusive identification number for individuals, equivalent to the tax identification number. This is done through a specific application using form EX 15 to be submitted to the Police Commissioner’s Office or the Immigration Office (Oficina de Extranjería) if you are within Spanish territory, or at Consular offices abroad.

 

It is an important identification number for dealings with Spanish administrative offices as a foreigner.

 

It can be requested not only by those intending to transfer their residency to Spain but also as a non-resident, to manage their economic, professional, and social interests related to Spain and to access many services, as well as to pay taxes.

 

NIE BLANCO and NIE VERDE

Generally, this document, similar to a tax code, is called NIE BLANCO or provisional document. When residency is obtained, the corresponding document is called NIE VERDE, but actually, inaccurately because it is not just an identification number but a document certifying Spanish residency or “Certificado de Registro de Ciudadano de la Unión Europea” (Certificate of Registration of Union Citizen).

 

As a foreigner to obtain foreign residency in Spain, or as explained above, what is improperly called NIE VERDE but more accurately “Certificado de Registro de Ciudadano de la Unión Europea,” you must be in one of the following 4 categories and submit the required supporting documentation:

 

  • Employee (employment declaration, proof of 3 months of pay stubs, and social security contributions)
  • Self-employed (proof of registration and conducting business for at least 3 months and payment of taxes and contributions)
  • Retiree (pension certificate, S1 form, or health insurance)
  • Economically self-sufficient (having a rental contract or ownership of property, health insurance, sufficient income to live deposited in a bank account).

 

EMPADRONAMIENTO

EMPADRONAMIENTO or registration in the Spanish census, is applicable to both residents and those who have only a domicile on Spanish soil and confirms the residence at a specific Spanish address.

 

It is obtained through a specific application to the Municipality or Ayuntamiento, sometimes also online, along with proof of residing in that location (e.g., rental contract of at least 6 months or property purchase contract).

 

SEGURIDAD SOCIAL or SOCIAL SECURITY

If you have an employed position or are self-employed, after obtaining the NIE and empadronamiento document, you can directly or, if employed, through your employer, apply for enrollment in the healthcare and social security system and obtain an affiliation number with seguridad social.

 

Once the number is obtained, you can apply for a health card to access the Spanish public healthcare system.

 

The number is required to make contributions necessary for healthcare assistance and to accumulate years for foreign pensions.

 

Residency Tax Canary Islands by Maltaway

Residency Tax Canary Islands by Maltaway

 

Residence Taxation and TAX Benefits in the Canary Islands

 

From a tax perspective, the first thing to consider is that Spain, including the Canary Islands, like Italy, is a country that applies a global declarative regime and worldwide taxation, meaning taxation on all incomes produced anywhere and not just those produced in the country of residence, unlike countries with territorial taxation and non-dom tax regimes like Malta.

 

In Spain, you are tax residents if:

 

  • You stay in the territory for more than 183 days.
  • Your activities or center of economic interests are based in Spain.
  • Your spouse or minor children habitually reside in Spain, unless proven otherwise.

 

This entails the obligation to pay taxes in Spain on all incomes produced worldwide and to apply a declarative regime for assets wherever they are located in the world.

 

 

Taxation in Spain

 

Spain operates under territorial autonomy in different communities regarding taxes, which can promote competitiveness among regions but also creates a highly varied and differentiated taxation system on incomes and assets.

 

Spain has a tax system with three levels of government where a portion of personal income tax is transferred to the autonomous communities.

 

Some analyses of tax competitiveness among different communities highlight that the most fiscally attractive communities are, for example, Madrid and the Canary Islands.

 

 

Tax Advantages in the Canary Islands

 

The Canary Islands attract particularly digital nomads, entrepreneurs, and retirees not only for the climate and the sea but also for the tax advantages they offer. Being autonomous regions, they differ from the tax treatment offered by other Spanish areas.

 

 

Special Tax Regimes (Beckham Law)

 

The special tax regime of the Beckham Law, which is also applicable throughout Spain, is a particular tax regime that allows residents in Spain to be taxed as non-residents, meaning only on income and earnings received in Spain and on assets in Spain.

 

If you are a Spanish tax resident (spending more than 183 days per year in Spain) and have not been a resident in Spain in the last 10 years, you can request to be taxed under this facilitated regime within six months of your arrival in Spain.

 

This privileged tax regime can be obtained for a maximum of five years following the year of application.

 

Dependent workers and assimilated repatriates (“impatriados”), excluding self-employed workers, professional athletes, and retirees, in Spain pay a rate of 24% on income up to 600,000 euros and at a higher rate over it.

 

 

Facilitated Tax Regime for Special Zone or ZEC Companies

 

The Canary Islands are also a Special Zone or ZEC that allows companies that meet certain minimum requirements for job creation (from 3 in smaller islands to 5 in the two largest) and investment (from 50,000 in smaller islands to 100,000 in Gran Canaria and Tenerife) to be taxed at only 4% on income tax.

 

Another requirement is that at least one of the administrators must reside in the Canary Islands. The activities that can be carried out in the ZEC are listed and are part of activities considered of strategic interest.

 

RIC or Reserva Inversiones de Canarias

 

It is a mechanism that allows for tax deductions by reducing the taxable base for economic and professional activities that reinvest income, following the specified modalities and procedures, to modernize, develop, and expand their business, but also if they create new jobs or open branches and detached offices abroad in specific States. The regulations detail how and when it is applicable, the precise conditions required in various economic sectors.

 

 

General Indirect Tax or IGIC

 

The General Indirect Tax of the Canary Islands or IGIC, equivalent to consumption tax like VAT, is very low with a general rate of 7% compared to the mainland rate of 21%.

 

 

Tax Regimes for Individuals

 

In addition to the ordinary regime, valid throughout Spain and discussed here, there are two taxation regimes for individuals:

 

direct estimation and module.

 

For both regimes, which are temporary and have been extended during the pandemic, a profound revision or even total cancellation is foreseen.

 

Direct estimation is a kind of lump sum regime that involves quarterly payments at a rate of 20% and a final settlement at the end of the year, with some possibilities for reductions and benefits, for example, for new businesses.

 

The module, on the other hand, involves a 2% payment on the taxable base calculated on a lump sum basis based on the activity carried out and the area. Particularly, businesses in the catering sector benefit from this type of facilitated and reduced taxation.

 

 

TAX Advantages for Retirees

 

Retirees who can benefit from tax exemptions on their pension in Italy can transfer their gross pension to the Canary Islands, paying lower taxes compared to many other countries.

 

Taxes on pension income in the Canary Islands are calculated using a tiered taxation system, as in Italy, but lower percentages are applied to the tiers. The difference with the rest of Spain lies in the fact that the non-taxable area for pensions in the Canary Islands is slightly higher.

 

European and non-EU retirees moving abroad must therefore submit a specific request for tax exemption, requesting the application of bilateral agreements, obviously if they are transferred to a country with which agreements are in force, and providing proof of tax residence abroad through a certificate issued by the competent foreign authority, registration in AIRE, and any other conditions required by the Convention.

 

The tax exemption process is not immediate and concurrent with the transfer but may take some time, at least months but even 1 year. However, excess taxes paid can be recovered within 48 months from the date of tax collection.

 

However, it must be clarified: not all pensions are exempt from tax everywhere.

 

First of all, it must be determined whether it is a public or private pension.

 

These principles of transferability of pensions abroad gross are generally applicable to those receiving a pension from private companies and entities, for example, Italian INPS.

 

On the contrary, employees of public administrations (this is provided for in Italy) cannot transfer their gross pension abroad because it will continue to be taxed in the country where the public administration is based where service was provided.

 

There are, however, exceptions, based on bilateral agreements between Italy and some States, where it is possible to obtain public pensions gross: Tunisia, Senegal, Chile, and Australia.

 

There are also some types of pensions that are not transferable abroad, such as social pensions, pensions and allowances for the disabled, or those connected to income and assistance benefits.

 

 

Contacts for Comprehensive Guide for Residency and Tax Benefits in the Canary Islands

 

Among the countries where we have extensive practice and direct life and professional work experience on site, there are Spain and the Canary Islands.

 

Before moving to live in a country, you need to start with an individual analysis of your legal, income, and asset profile, starting from a global economic, financial, legal, and regulatory overview of the new destination country, which requires specific and in-depth knowledge and skills.

 

Therefore, before making choices, undertaking projects, or paths of transfer abroad or from one country to another, it is better to rely on an experienced professional in international consulting who can support and guide you in your choice and your path.

 

Investing in professional advice can ensure a smooth transition and effective management of your economic, financial and tax situation in a new country.

 

For all legal and tax consulting needs and residence of Investors, Individuals, and Companies and for traditional or crypto asset allocation choices, or for your expatriation and international transfer to any part of the world, do not hesitate to contact us

 

CONTATCTS MALTAWAY

 

 

Privacy Preference Center

PRIVACY GDPR

to be compliant with the data rules

GDPR