For many people, it might be a distant dream, but with great communication and flight connections between a majority of destinations, it is easier than you might think to escape your working life’s hectic pace by moving abroad.
The Canary Islands meet many of the qualifications and make it the perfect setting for a higher quality working life or stress-free and happy retirement. There are seven islands for you to choose from, and we are going to provide you with a useful guide to some of the important practical and financial issues that you might not have considered yet.
Working in the Canary Islands
Brexit has motivated numerous individuals to move their businesses abroad. One favourite is the Canary Islands since it offers the most preference tax rates in all of Europe. The following is an overview of the most significant incentives:
Although the Canary Islands belong to the European Union, they are considered to be outside of the territorial scope subject to the Spanish value-added tax (VA). In addition, rather than the 21% Spanish VAT rate they have an IGIC 7% general rate.
Businesses that are established in the Canaries are able to benefit from tax credits for investing in Western African countries, and also for certain exporting activities (15% for certain advertising expenses and 15% for investments made in permanent establishments or incorporation of subsidiaries)
The Reserve for Investment (RIC) in the Canary Islands enables businesses to lower their taxable profits by up to 90% through reinvesting in certain Canary Island qualifying assets (limited companies and sole traders).
Businesses that are established within the Canary Islands might benefit from additional deductions compared to Spain’s general tax deduction system. They include innovation, development, and research, to acquiring fixed assets or film productions.
If you make national insurance contributions and register to work in Spain, you can receive the same state-run health care that Spanish nationals get. As a retired individual receiving a UK old age state pension, you may contact the Overseas Healthcare and request an S1 Form to register in Spain for free healthcare. The law protects access to healthcare by pregnant women and children.
If there are no means for you to receive cover for state-run healthcare, then there is a special pay-in scheme that is offered by regional health authorities in Spain. The public health insurance scheme is available nation-wide. A monthly fee must be paid to get access to state-run healthcare, and each autonomous region manages the scheme.
For individuals under the age of 65, the basic monthly fee costs €60 and for those 65 and older the fee is €157. However, there is no subsidy on prescriptions and you will have to pay 100% of your prescription costs. At this time this type of cover doesn’t provide holders with EHIC, so if you are planning on travelling, then you should consider getting private travel insurance. Check with your chosen region to make sure that the scheme is available there.
Retiring in the Canary Islands
If you would like to improve your life, then you might want to consider retiring abroad. Among expats searching for a retirement that offers both a sunny climate and low cost of living, Spain is very popular. Income tax might be higher due to having a lower personal allowance compared to the UK, however, your savings will still take you further than and provide you with a higher standard of living and comfortable lifestyle.
Canarian special zone (ZEC)
In January 2000 the European Commision authorised ZEC as a low tax zone for the Canary Islands. New Companies carrying out activities that the ZEC Consortium Board has authorised receive numerous benefits:
Reduced 4% Corporate Income Tax rate as opposed to the current 25% rate.
Exempt from Stamp Duty Tax and Property Transfer Tax.
Exemption from operations involving other ZEC companies and exempt from IGIC on imports (on both finished products or investment materials and raw materials).
Dividends that a ZEC company sents to the parent company located outside of Spain are exempt from having pay tax at the source. The International Double Taxation Agreement is applied at the destination.
ZEC company requirements:
Must be a new branch or company
One administrator at least must be residing in the Canary Islands
Invest a minimum of €50,000/€100,000 (depending on whether it is a smaller island or a capital island – Gran Canaria or Tenerife)
Create a minimum of three jobs/five jobs (depending on whether it is a small or large island, as above).