Self-Employed in the Canary Islands: IGIC, REPEP and ZEC Explained

In short: The Canary Islands don’t have Spanish VAT but their own island tax, IGIC, with a standard rate of 7 %. Since 1 July 2026, small self-employed businesses with turnover of up to 50,000 € can use the REPEP small business scheme and then issue invoices without IGIC. The ZEC special zone with 4 % corporate tax only applies to companies, not to Autónomos (self-employed individuals).

What is different in the Canary Islands and what isn’t?

The Canary Islands are part of Spain and the EU, but have their own economic and tax regime. For the self-employed, this mainly affects tax on turnover. Everything else works as it does throughout Spain.

So in the Canary Islands you deal with two tax administrations. The Canarian one is responsible for IGIC, while the state one remains responsible for your income tax and for registering your activity with Modelo 036.

IGIC: the island tax instead of VAT

IGIC stands for Impuesto General Indirecto Canario. In principle the tax works like VAT: you add it to your invoices, deduct the IGIC on your own purchases as input tax and pay over the difference.

• Rate: the standard rate is 7 %. In addition there are reduced and increased rates for certain goods and services as well as a zero rate. Which rate applies to your service is stated by the Agencia Tributaria Canaria.
• Return: you declare IGIC quarterly with Modelo 420.
• For your customers: private customers on the islands pay 7 % instead of 21 %. That makes your service cheaper for them or leaves you more at the same final price.

If you have customers on the mainland, in Germany or in Austria, it gets more complicated. The Canary Islands are not part of the EU VAT area. Which tax belongs on an invoice across the island border depends on the type of service and on the customer. Have a Gestoría (office for bookkeeping and dealing with the authorities) on the islands go through this for your typical jobs before you write your first invoice.

REPEP: invoices without IGIC up to 50,000 € turnover

REPEP is the small business scheme within IGIC. For many freelancers moving to the Canary Islands, it is the most interesting difference from the mainland, because there is no comparable general VAT exemption for the self-employed there.

The new threshold since July 2026

On 1 July 2026 the turnover threshold was raised from 30,000 € to 50,000 € a year. If you stay below it, you can opt for the scheme.

What the scheme means

• Voluntary: you don’t have to use the scheme. You apply via the Modelo 400 census declaration with the Agencia Tributaria Canaria.
• No IGIC on your invoices: you don’t charge your customers IGIC.
• No input tax deduction: you don’t get back the IGIC you pay yourself on purchases.
• Fewer returns: from 1 January 2027, one annual return is due to replace the four quarterly ones under REPEP. The Agencia Tributaria Canaria will confirm the exact obligations.

Who it pays off for

The maths is simple: if you mainly sell to private customers and buy little, you benefit, because the final price without IGIC is lower and you lose hardly any input tax. That applies to many service providers. If, on the other hand, you invest a lot at the start, for example in equipment, a vehicle or shop fittings, under REPEP you lose the deduction of the IGIC paid on them. Work through both options with your own figures.

Autónomo in the Canary Islands: registration, contributions, income tax

There is no island bonus for social security. You register in the RETA special scheme via the Import@ss portal just as on the mainland, before starting your activity. In 2026 the minimum contribution depends on net earnings and, depending on the band, ranges from around 206 € to around 607 € a month. Newcomers pay 80 € a month for the first 12 months with the Tarifa plana (flat rate). You’ll find the whole process under Registering as an Autónomo.

Cuota cero: refund of contributions

Through the “Cuota cero” programme, the Canarian government refunds the reduced contributions you paid during the Tarifa plana. This is a retrospective refund on application: you pay the 80 € yourself at first. The requirements are that you received the state benefit, are registered in RETA at the time of application, and that your tax domicile and activity are in the Canary Islands. There are calls for 2024, 2025 and 2026. According to the published information, the 2026 deadline runs until 15 October 2026 and applies to self-employed people who started their activity in 2025. Current calls are on the Canarian government’s website; the link is below in the sources.

Income tax

Your profit is subject to normal Spanish income tax (IRPF), which consists of a state part and a regional part. In 2026 the Canarian scale has seven bands from 9 % to 26 %. Together with the state part, this gives 18.5 % in the lowest and 50.5 % in the highest band. More on this in the article Taxes in Spain.

ZEC: 4 % corporate tax, but only for companies

The Zona Especial Canaria (ZEC) is a special zone with a corporate tax rate of 4 %. Online it is often presented as a tax saving model for everyone. That isn’t quite right.

Requirements

In addition, on all islands:

• an approved activity according to the list in the law
• at least one director with tax residence in the Canary Islands
• registered office and actual management in the Canary Islands

In certain cases an exemption from the investment requirement can be requested.

Deadline

As things stand, registration in the ZEC register can only be approved until 31 December 2026. The benefits run until 2032. Whether the approval deadline will be extended was still open in October 2026. If you are planning a company, first ask the ZEC Consortium which deadline currently applies.

Who are the Canary Islands worthwhile for as a base?

For most self-employed people from Germany and Austria, the advantage is not the ZEC but the combination of low IGIC and REPEP. An honest assessment:

• You sell to private customers on the islands: the low IGIC rate or REPEP has a direct effect on your price.
• You stay under 50,000 € turnover and have few purchases: REPEP saves you tax and admin.
• You are planning a company with several employees and real activity on the islands: the ZEC is worth a look while the deadline runs.
• You earn very well: bear in mind that the top rate of income tax in the Canary Islands is higher than in Andalusia.

For social security and income tax in the lower and middle ranges, the differences from the mainland are small. Which island or region suits your life is shown in the comparison Where in Spain?. The other routes to an income are under Working in Spain.

Frequently asked questions