Sunshine taxes: Incentives for self-employment in Spain’s Canary Islands
:::: This is a guest post from our partners, Entre Tramites :::
This a guest post from our professional partners Entre Tramites
The Canary Islands offer some of the most attractive tax incentives for self-employed individuals in Spain. Thanks to their special economic and tax regime, entrepreneurs andfreelancers operating in the region can benefit from reduced tax rates, special deductions,and other exclusive incentives. This guide explains the main tax advantages available in2025 and how they can help you optimize your tax strategy.
Canary Islands Economic and Tax Regime (REF)
The Canary Islands Economic and Tax Regime (REF) provides multiple benefits for businesses and self-employed individuals. Its goal is to drive economic growth and attract investment to the islands by offering lower tax rates compared to the rest of Spain.
Reduction in Personal Income Tax (IRPF)
Self-employed individuals in the Canary Islands can benefit from reduced rates in the Personal Income Tax (IRPF), including:
● Greater deductions and bonuses for expenses related to business activities.
● Lower tax brackets for entrepreneurs with lower incomes.
● Specific deductions for investments in innovation and sustainable business practices.
Replacement of VAT with IGIC (Canary Islands General Indirect Tax)
One of the most significant tax advantages is the application of IGIC instead of the national VAT. The general IGIC rate is 7%, considerably lower than the 21% VAT rate in mainland Spain. Additionally, certain goods and services can benefit from reduced rates, providing further savings for self-employed individuals.
Canary Islands Investment Reserve (RIC)
The RIC allows self-employed individuals to allocate up to 90% of their net profits to an investment reserve, thereby reducing their taxable income. These funds must be reinvested in eligible business activities within a specified period, making it an excellent tool for long-term tax planning.
Special Deductions for Entrepreneurship and Innovation
In the Canary Islands, there are additional deductions for:
● Investments in technological innovation and digitalization.
● Hiring employees in the region, which may include reductions in social security contributions.
● Sustainable energy projects and eco-friendly businesses.
How to Take Advantage of These Incentives
To maximize these tax benefits, self-employed individuals in the Canary Islands should:
● Keep a detailed record of their business expenses and applicable deductions.
● Consider reinvesting profits in eligible activities under the RIC system.
● Seek advice from a tax expert to ensure compliance with regional requirements and optimize tax savings.
Conclusion
The Canary Islands remain a highly attractive destination for self-employed individuals due to their favourable tax policies and business-friendly environment. Whether you are a freelancer, entrepreneur, or small business owner, these incentives can help you reduce your tax burden and reinvest in the growth of your business.
If you need help taking advantage of these tax benefits, Entre Trámites is here to assist you. Our team of experts in taxation for self-employed individuals in Spain will help you maximize your savings opportunities. Schedule a free consultation today and let them handle the paperwork!