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How to set up a company in the Canary Islands?

Starting a business provides opportunities for personal and financial growth. But where and how is a matter of utmost concern. In this article, we’ll talk about how to set up a company in the Canary Islands. 

If you want to invest as an expat or high-net-worth individual, which is what I specialize in, you can email me (advice@adamfayed.com) or use WhatsApp (+44-7393-450-837).


The Canary Islands are definitely a good place to live if you want all the benefits of living in Europe but with some isolation from the mainland. In addition, there are eight main islands to choose from, giving you a lot of variety.

If you have ever holidayed in the Canary Islands, you will be familiar with such names as Tenerife, Gran Canaria and Lanzarote. These are the most popular with tourists, but you also have the choice between cities like La Palma, La Gomera, El Hierro and La Graciosa.

Whichever island you choose, you can be sure the weather will be great. About 100 km off the African coast, the Canary Islands boast better weather than southern Europe.

In summer, the temperature does not rise above 25 degrees Celsius, while in winter it drops to about 16 degrees. While you won’t find scorching highs like the Mediterranean, the Canary Islands benefit from temperatures that stay in the 20s well into October.

The Canary Islands are perfect for those who want an active lifestyle. There are four national parks, two of which are UNESCO World Heritage Sites. The rest are biosphere reserves, which should give you some idea of ​​the quality and beauty of the local scenery.

Traveling between the islands is also easy. The Canary Islands Tourist Board has a website dedicated to travel planning and it says you can catch a flight from Lanzarote to La Palma (the two furthest islands) in just 80 minutes. In short, day trips between the islands are never out of the question.

The Canary Islands aren’t as famous for their cultural heritage as mainland Spain, but that doesn’t mean they aren’t devoid of attractions. There are several fine churches and other architectural works. But if that’s not your thing, the islands certainly have hundreds of stunning beaches.

Finally, the Canary Islands are home to great food. The Spanish influence is obvious, and seafood is very important here. Expect plenty of fresh meats, fruits and vegetables at local markets, and a range of interesting regional wines to wash it all down.

In short, life in the Canary Islands offers everything you could experience during your holiday. The weather is almost always amazing, the food is great, and you will never run out of things to do even if you just spend the day at the beach relaxing!

Setting up your company in the Canary Islands

How to set up a company in the Canary Islands? 3

The Canary Islands form an “autonomous region” within the Kingdom of Spain. The islands have their own government, parliament, and administration, established by the Statute of Autonomy of the Canary Islands.

The fiscal and economic system of the Canaries differs from the general Spanish system that operates in most of the mainland.

As part of Spain, the Canary Islands are also part of the European Union. However, the islands enjoy some exceptions in the financial and economic sphere.

If you have decided to open an office of your company or move employees to Europe and at the same time pay minimal taxes, then you should pay attention to the Canary Islands.

Since in Spain it is easy to combine business and personal preferences: safety, quality of life, climate, sunny days, the possibility of surfing and diving, healthy food, as well as what is important for business – a clear, transparent immigration and tax policy, low business costs, convenient logistics in Europe.

In this article, we will show you the answer to the question on how to buy or open a business in the Canary Islands?

In addition, the company’s portfolio contains current offers for the purchase of a ready-made business, as well as residential and commercial real estate in Spain.

You can buy your own real estate or buy a business in the Canary Islands, which will bring a stable and high income. Entrepreneurs who have a desire to register a company in the Canary Islands have the opportunity to establish a company in Tenerife. You can learn more about the procedure in more detail by reading our article.

The Canary Islands consists of seven islands of volcanic origin. They are an autonomous community belonging to Spain. The largest island in the archipelago is Tenerife.

Economic and tax regime of the Canary Islands (REF)

Although the Canary Islands are subject to the tax rules of the Kingdom of Spain, companies operating there are also eligible for special tax incentives (Special Tax Regime or REF).

Main features of REF:

1. VAT does not apply in the Canary Islands.

Instead, there is a Special Sales Tax (IGIC) which has a general rate of 5%. In addition to the higher and lower IGIC rates, there is a zero tax rate for certain products and services with basic general needs (such as telecommunications).

2. Exemption from duty on capital.

Use of retained earnings to reduce the tax base, provided that the relevant amounts are invested within 3 years in certain qualifying fixed assets or public shares.

3. Extended tax incentives for various types of investments.

Organizational and legal forms

Registration of a company in Tenerife, as in any other jurisdiction, begins with the choice of the legal form of the enterprise. Therefore, it should be borne in mind that on the territory of the specified state you can open:

Limited Liability Company (Sociedad de Responsabilidad Limitada or SL) – an organization that can be created by individuals or legal entities with a share capital divided into shares;
Joint stock company (Sociedad Anonima or SA) – a company with shares divided by a certain number, which can easily be transferred to other persons;
A private enterprise (Empresario Individual or Autonomo) is an enterprise owned by individuals or legal entities.

To register an LLC in the Canary islands, you need to:

have at least one director (can be both an individual and a legal entity, with no residency requirements);
contribute the authorized capital, the amount of which will not be less than 3000 EUR;
obtain a certificate of registration of the company name;
receive an open deed of registration of a company in Tenerife, certified by a notary;
apply for a company tax identification code (NIE).

Company registration procedure in the Canary Islands

An agreement is concluded with an assessor (economic lawyer) to conduct the affairs of the company;

Three options for the name of the company are selected and through an assessor, or independently sent to the central registration authority. The names are arranged according to preference in descending order. The response time is about a month. The permission to use the company name is valid for two months;

Upon registration of the name of the company, a savings account is opened in a Spanish bank and the full amount declared by the proposed Charter of the company is deposited into the newly opened account;

The Charter of the society being created, prepared jointly with the assessor, is certified in the presence of all members by a notary;

The seal of the company is made (forms, business cards and other attributes of the company are made at the discretion of the members of the company;

The certified Charter of the company is sent for registration to the Spanish Chamber of Commerce to enter the company in the unified state register and to the fiscal authorities to obtain a tax number (CIF), and, if necessary, to the licensing authorities.

A newly registered company can start working after the completion of registration with the above bodies.

Taxation of doing business in the Canary Islands

The Canary Islands are subject, in general, to the general regime of the Spanish tax system, which is a modern system of taxation, harmonized and subordinated to the European Union. This means that it is possible to operate in the single European market, enjoying the freedom of movement of capital, goods and people within the European Union.

However, a number of specific measures apply to the Canary Islands, regulating the Economic and Tax Regime of the Canary Archipelago (REF). The tax measures are a series of highly favorable tax incentives, for direct and indirect taxation, which can be used by companies that contribute to the economic development of the Canary Islands.

So, based on the decision of the European Commission in 2000, the Canary Islands were recognized as a Special Economic Zone (Zona Especial Canaria – ZEC) with a low tax rate. At the same time, the duration of the benefits regime in the Canary Islands is set until December 31, 2019 and can be extended by the European Commission.

The status of a special economic zone allows companies registered in the Canary Islands to compensate for certain difficulties that arise as a result of geographical remoteness from European markets. Tax benefits for ZEC residents are provided for corporate income tax and property transfer tax.

The tax incentives are in addition to the Spanish tax system and are fully compatible with the current tax system in the European single market. So, in the Economic and Tax Regime of the Canary Islands, 2 types of benefits can be distinguished:

Benefits related to productive investments, such as in the Canary Islands Investment Reserve, deductions from investments in fixed capital of the Canary Islands, increased rates of investment tax credits under the general income tax scheme, as well as separate exemptions provided for indirect taxes.
Exemptions providing for significant reductions in the tax rate in the Canary Islands, being a Special Economic Zone (ZEC) (although a minimum amount of investment is required here, the ZEC is essentially a low-tax zone), exemptions on manufactured goods, a special register of ships and shipping companies, regulatory legal acts (IGIC), as well as specific regulations on excises.

Favorable conditions for doing business have been created in the Canary Islands, which attracts an increasing number of investors and entrepreneurs. Strategic location, exceptional climate, quality of life, tax advantages, privileged access to European markets and emerging markets in West Africa, technological level, infrastructure – for all these reasons it is an excellent center of entrepreneurship that offers business opportunities to a huge number of industries, from creative and cultural to those related to the digital economy, through the maritime sector or the blue economy. The article discusses the key elements of low-cost taxation – the economic and tax regime of the Canary Islands, and how businesses can benefit from registering in special zones.

Indirect general taxes

The Canary Islands are not part of the territory of the European Community for VAT purposes (according to Article 6 of the VAT Directive). EU harmonized VAT rules do not apply to the Canary Islands and the decision to apply turnover taxes is determined by the national or local authorities, respecting the general principles of the Treaty on the Functioning of the European Union and in particular non-discrimination in the taxation of products.

There is a local consumption tax in the Canary Islands, known as IGIC (Impuesto General Indirecto de Canarias – General Indirect Tax in the Canary Islands), which replaces the Value Added Tax (VAT) of the European Community. This tax is levied on final consumption and applied at several different rates.

The tax, better known by the acronym IGIC, was introduced as part of Law 20/1991 of 7 June amending the fiscal aspects of the economic fiscal regime of the Canary Islands and amended by Law 4/2012 of 25 June on administrative and fiscal measures and law 17/2019 of 9 May.

IGIC is levied on the supply of goods and services (sales) carried out by businessmen and professionals on a regular or occasional basis, as well as on the import of goods, regardless of the status of the importer, carried out in the direction of the Canary Islands market.

This is the main burden of indirect taxation in the Canary Islands. It belongs to the family of value-added taxes due to the great similarity both in the taxable event and in the date of assessment and settlement, but with a big difference in setting lower tax rates (general rate 7%, as opposed to 21% in the peninsula) and up to 0% in some goods and services.

In order to achieve the effect of taxing only the value added, each entrepreneur transfers the tax to his client by applying a percentage (tax rate) to the transaction price (the price that constitutes the taxable base of the tax). In addition, since this affects the overall price, the tax burden is fully carried over to the next stage until it reaches the end consumer, who bears the entire burden of the IGIC but does not have the right to deduct the fees incurred, a right that only employers have when they act as such.

The recently adopted Law 19/2019 of 30 December on the general budgets of the Autonomous Community of the Canary Islands for 2020, amended Law 4/2012 of 25 June on administrative and fiscal measures, namely, it established the IGIC rates for various types of taxes:

Zero rate: 0% is generally applied to basic consumer goods and services or public equipment such as, for example, water, books, electricity, feminine hygiene products, school supplies, oil, inter-island transport, medicines not used by humans, electricity, oil, hybrid electric vehicles (whose emissions do not exceed 110 grams). The full list is set out in Article 52, Law 4/2012 of 25 June;
Reduced tax rate: 3% applies to imports of goods of industrial activity and industrial food, access to theatrical and musical performances, telecommunications services specified in Art. 54, Law 4/2012 of 25 June;
General rate: 7%, applicable to supplies of goods and services that are not subject to any other current rates provided for in article 51 of Law 4/2012 of 25 June;
Increased rate: 9.5% applies to certain supplies of goods and services by vehicles, ships and aircraft, 9.5% increase applicable to supplies of goods and services referred to in Art. 55, Law 4/2012 of 25 June;
An increased rate of 15% applies to supplies of luxury goods or wealth (cigars and alcoholic beverages) and goods and services referred to in art. 56, Law 4/2012 of 25 June;
Special rate: 20% applies to supplies of goods and services specified in art. 57, Law 4/2012 of June 25, including tobacco products, with the exception of cigars.

The general regime applies to businessmen and professionals who do not carry out exclusively tax-exempt operations in the Canary Islands, while special regimes apply to:

Individuals engaged in certain types of activities: simplified special regime (modules);
To certain farmers and ranchers: special treatment for agriculture, livestock and fishing;
Organizers of tourist routes: special regime of travel agencies;
Retailers-importers: special regime for retailers;
Some wholesalers: special treatment for used goods and art, antiques and collectibles;
Producers and wholesalers of pure gold, which serves as the basis for financial transactions (investment gold).

Preferential taxation for companies in the Canary Islands (ZEC)

ZEC (Zona Especial Canaria) – translated from Spanish means “Special Economic Zone of the Canary Islands.”

It is a low tax area created under the Canary Islands Economic and Fiscal Regime (REF) with the aim of stimulating the economic and social development of the islands.

Any company intending to carry out production, commercial or service activities in the territory of the Canary Islands may register with the ZEC.

Service companies registered under the ZEC can be established in any part of the Canary Islands.

Production, processing, loading and unloading and distribution activities must be registered in certain designated areas.

Any company wishing to register with the ZEC must meet a number of requirements:

1. ZEC must be newly incorporated;

2. At least one of the persons authorized to manage and act on behalf of the Company must be a resident of the Canary Islands;

3. ZEC must invest at least EUR 100,000 (EUR 50,000 in some locations) in business-related fixed assets within the first two years after obtaining the permit;

4. ZEC must employ at least 5 people (reduced to 3 in some locations) within the first 6 months of obtaining a permit and must maintain this number of employees on average throughout its operations;

5. The ZEC company must provide a description of its activities, with particular reference to its economic viability, international focus, contribution to the economic and social development of the Canary Islands and solvency.

Investors wishing to settle in ZEC must obtain prior approval from the Board of Governors of the ZEC Consortium in order to become a ZEC legal entity. The procedure is simple and starts with the submission of a request for authorization to registration in the ZEC Official Registry of Companies (ROEZEC), submission of a descriptive report on the economic activity carried out, along with some documents that need to be submitted. After receiving prior permission, which must be granted within two months from the date of application, the company can register in the ZEC Official Registry of Legal Entities (hereinafter: – “ROEZEC” (Registro Oficial de Entidades de la ZEC)) with the provision of an identification tax code ( CIF), a copy of the document certifying its foundation, submitted to the Registrar of Companies and an application for registration with ROEZEC.

Opening a bank account for your business in the Canary Islands

The Spanish banking system includes commercial banks, money funds and credit cooperatives. Our experts draw your attention to the following financial institutions:

Banca March. The bank has 90 years of experience. Offers services to both small and large businesses, finding an approach to each client individually.
Ciaxa Bank. Offers its clients a wide range of services tailored to the needs of its clients and works to remain the number one bank in Spain. In 2019, it became the best bank in Western Europe.
BBVA Bank with over 160 years of history. It has a leading position in the Spanish market and is the largest financial institution in Mexico. The bank provides a wide range of services and has an individual approach to clients.

It should be noted that some local banks support the Alliance Lite 2 system. Those who wish to open a corporate account in Tenerife can order a personal consultation from experts and receive support at the stages of the procedure for opening an account for a company.

Obtaining the status of a registered company in the special zones of the Canary Islands offers interesting opportunities for positioning itself as a laboratory for innovation and testing new technologies and business models, or as a place to host digital nomads or create professional service businesses. The islands have the lowest corporate tax on the European continent and the government is more open to innovation, providing unique business opportunities in the archipelago.

Pained by financial indecision? Want to invest with Adam?

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How to set up a company in the Canary Islands? 4

Adam is an internationally recognised author on financial matters, with over 760.2 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.

4 Responses

  1. Dear Sir,

    I am writing to inquire about the process and requirements for forming a company in the Canary Islands that will be engaged in grain trading. Specifically, we are interested in establishing a company where the shareholder will be a resident of France.

    Here are some specific questions and considerations we would like to discuss with your firm:

    Legal and Regulatory Requirements: Could you provide an overview of the legal and regulatory requirements for company formation in the Canary Islands?
    Residency: Given that our shareholder is a resident of France, are there any residency considerations that need to be addressed during the company formation process?
    Timeline and Costs: What is the estimated timeline for the company formation process, and can you provide an approximate breakdown of the associated costs?
    Additional Services: Do you offer additional services such as accounting, legal representation?

    Thank you in advance and we look forward to your response.

    1. The article is for general purposes only. If you want us to put you in contact with one of our partners we will.

  2. Hallo,

    can you please send me price of set up new or ready made compay with

    bank account in Canary Island. Thank you Olda Neumann

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