Tax advantages and special regulations make buying property in the Canary Islands attractive.
These advantages result from the special tax status of the Canary Islands within the European Union.
Lower indirect taxes
In the Canary Islands, the “Impuesto General Indirecto Canario” (IGIC) applies to the purchase of real estate instead of the Spanish value added tax (IVA).
While the VAT in Spain for the purchase of a new property is usually 10%, the IGIC in the Canary Islands is only 7%.
This means that buying a new property in the Canary Islands can be more tax-efficient than on the Spanish mainland.
Real estate transfer tax
As in the rest of Spain, a property transfer tax (Impuesto sobre Transmisiones Patrimoniales, ITP) is levied on the purchase of second-hand properties in the Canary Islands.
The tax rate varies depending on the region, but is moderate in the Canary Islands compared to other Spanish regions.
However, there may be differences in the rates depending on the value of the property and the specific island.
Inheritance and gift tax
In the Canary Islands, there are also certain advantages when it comes to inheritance and gift tax.
The Canary Islands government grants reductions or exemptions in certain cases, especially when close relatives are involved.
This can mean considerable tax relief when transferring property by inheritance or gift.
Income tax for non-residents
If you rent out the property, the rental income is subject to income tax for non-residents (Impuesto sobre la Renta de No Residentes, IRNR).
While the tax rate for non-residents is generally 19% (for EU citizens) or 24% (for non-EU citizens), there are certain tax deductions available in the Canary Islands that can be used depending on your individual situation.
However, these possibilities are similar to those on the mainland and are not specific to the Canary Islands.
Exemptions and discounts for first-time buyers
In some cases, first-time buyers who establish their main residence in the Canary Islands can benefit from additional tax reductions.
However, these regulations may vary depending on current legislation and regional policies and should be checked in detail.
In summary, buying a property in the Canary Islands offers tax advantages, particularly due to the lower IGIC compared to Spanish VAT.
There are also potential reductions in other taxes such as inheritance and gift tax.
Nevertheless, it is important to inform yourself thoroughly before buying and, if necessary, seek professional advice in order to make the most of all the individual advantages.
