It’s easy to be confused with the tax status of Lanzarote and the other Canary islands. Although we have been part of Spain for 600 years, we’re an autonomous region, which means we have a high degree of self government.

We also have some quirks in our fiscal system which are interesting:

We are very much part of the EU, but…..

We are outside the EU in terms of customs allowances

We’re not part of the EU customs union. That means when you buy goods like cigarettes and booze here, you are limited to how much you can take home. Here are the duty free limits.

So we’re duty free!

The upside is those products are cheap – because they are duty free. A packet of Marlboro is less than €4, and a bottle of Johnnie Walker Red Label is around €12, so the savings are massive.

We don’t have VAT

In Spain they have IVA, which is VAT, at 21% on most goods, in the UK they have VAT at 20%. Here in The Canaries, we are exempt from VAT, but we do pay a local sales tax on most goods, which is just 7%, so that’s another reason things often seem cheaper here.

But that can make things complicated……

If you want to import stuff (even your own property) to the islands, you may have to pay import duty. Likewise, if you order products from online retailers like Amazon, you should, in theory, order them without VAT, but pay an import duty on them. In reality, it’s pretty hit and miss, but that is what should happen.

We’re a ZEC!

What’s that? A special economic zone – and that means great incentives for new start businesses here. This applies to certain types of business, and there are strict criteria:

  • They must be new companies
  • One of the administrators must be a resident of the islands
  • At least €100,000 must be invested in the first two years
  • They must employ at least 5 people

In return they get:

  • Corporation tax reduced from 30% to 4%
  • Exemption from sales tax (IGIC) in most cases
  • Exemption from capital transfer tax

So there you have it, and yes it’s confusing! We’re unique in so many ways here in Lanzarote. Geographically we’re in Africa, politically we’re part of Spain and the EU and fiscally, we’re part of The Canaries special tax regime.

Here are some top tips for shopping in Lanzarote.