Tenerife is the largest and most popular among tourists among the Canary Islands. Its area is just over 2,000 km, and its population is more than 960,000 inhabitants.
This truly paradisiacal island beckons with its coast with a warm, dry climate and spacious well-maintained beaches in the south, nice weather with a light breeze in the north, and picturesque landscapes of the highest point of Spain, the Teide volcano, in the south.
Tenerife welcomes guests 365 days a year, cordially offering them its natural and man-made and tourist attractions, and fascinating excursions to resort towns.
Are you thinking about buying property on the island? This is a great idea, because this is what you get:
- warm sunny climate all year round;
- tourist season 365 days a year;
- favorable ecological environment;
- low crime rate;
- low maintenance costs of property;
- favorable taxation.
And although all of the above are important factors for the profitability of your future property object, nevertheless, the last point is worth considering in more detail, because it significantly distinguishes Tenerife from mainland Spain.
Tenerife – Tax Benefits
Tenerife offers a perfect tax regime in European Union, thanks to the Canary Islands Special Zone (ZEC), with a 4% Corporate Tax, instead of 30% of the basic regime that significantly favourable for local tax payers than for other European ones on average.
Tax benefits of Tenerife include low-rate taxation, bilateral agreements excluding double taxation as well as reciprocal protection of investments. The Investment Reserve of the Canary Islands (RIC) can reduce the taxable base of up to 90% of the Undistributed Profits and Tax Deductions for investment funds in R+D or any innovative activity.
The Economic and Tax Regime of Tenerife has undeniable advantages for business in Europe: duly authorized, transparent and compatible with EU legislation.
Also, Tenerife boasts the an easy access to the Free Trade Zone with absence of import duties, indirect taxes and special taxes on production imported from and to a third country outside the European Union.
Tenerife – Tax Free Shopping
Tenerife is a part of the Canary Islands, which belong to a group of nine areas of the European Union but are placed outside of Europe – they are also called the “outermost regions” (OMR). These territories are not subject to the EU’s customs and VAT regulations. So, when you buy any products in Tenerife, you don’t need to pay VAT!
Tenerife – VAT Rate
You can forget about VAT in Tenerife but remember about a local consumer to known as the IGIC (Impuesto General Indirecto de Canarias – Canaries General Indirect Tax) that applied at several different rates. Thus, this tax is applicable to sales and service providers in Tenerife with the general rate of 7% as opposed to 21% VAT.
Income Tax for the Canary Islands
Tenerife offers a very attractive tax rate within the Canary Islands Special Zone (ZAC), with a 4% Corporate Tax, instead of 30% of the general regime in the rest of Spain. Non-resident income tax is not subject to withholding on dividend distributions.
The personal income tax in Tenerife can vary, for example: 25% for income over €90,000 and 26% for income over €120,000.
Also, please find below other rates:
| Taxable Base From | Taxable Base To | State Rate | Regional Tax Rate | Total Rate |
| 0 | 12,450 | 9.5% | 9.0% | 18.5% |
| 12,450 | 17,707 | 12.0% | 11.5% | 23.5% |
| 17,707 | 20,200 | 12.0% | 14.0% | 26.0% |
| 20,200 | 33,007 | 15.0% | 14.0% | 29.0% |
| 33,007 | 35,200 | 15.0% | 18.5% | 33.5% |
| 35,200 | 53,407 | 18.5% | 18.5% | 37.0% |
| 53,407 | 60,000 | 18.5% | 23.5% | 42.0% |
| 60,000 | 90,000 | 22.5% | 23.5% | 46.0% |
| 90,000 | 120,000 | 22.5% | 25.0% | 47.5% |
| 120,000 | 300,000 | 22.5% | 26.0% | 48.5% |
| 300,000 | 23.5% | 26.0% | 49.5% |
Taxes on Home Ownership in Tenerife
As for the tax rates on real estate ownership in Tenerife, it is worth mentioning the following:
- Municipal property tax IBI (it depends on the cadastral value, takes into account the area, year of construction and condition of the object) in the amount of 0.15% of the real value of the property object.
- State tax for non-residents who own Spanish real estate (the calculation also comes from the cadastral value, often coinciding with the IBI).
- Garbage collection tax. It is charged twice a year, the total amount will be about 50 euros.
As we can see, the tax climate in Tenerife is no less attractive than the geographical one, which means that the purchase of a desired property in a corner of paradise should not be postponed.
