Why would you want to open a Gran Canaria business? Well, first of all, it has fantastic weather, allowing anyone to be able to do business 365 days a year, modern infrastructure, broadband internet, and a convenient location between four continents. Besides all these, there is no VAT. Instead, there is a local indirect tax called IGIC (Impuesto General Indirecto Canario, Canarian General Indirect Tax) which is 3%-7% on the majority of items.
(Updated: September 2022)
There are important tax incentives for Gran Canaria businesses who:
- Invest in tangible assets (excluding plots of land), for the development of the economic activity of the business
- Invest in tangible assets that protect the environment
- Create new jobs
- Create new jobs for the disabled
- Set up industrial or manufacturing facilities
- Invest or spend in export activities
- Invest in research, development, and innovative technology
- Invest in IT or communication technology
- Belong to the transport sector and invest in modernizing it.
- Set up offices or companies in different countries, to help export products or sell tourist services in Spain. A minimum of 25% of the capital of the new companies must be owned by the Gran Canaria (or Spanish) company
- Spend on promoting products or services in international trade shows (this also includes those taking place in Spain)
- Spend on goods of cultural interest
- Invest in filmmaking
- Invest in publishing books
- Spend in training their staff
- Companies who contribute to the pension funds of their staff
- Invest in workers’ children’s day care facilities
The European Central Bank has started raising interest rates and this will continue during the next years until inflation is under control. They will also stop printing money like crazy. All this means that an economic slowdown is around the corner. People will start cutting back on non-essential expenses if their monthly mortgage instalment is up by an additional 125-150 euros.
Another factor that you need to consider is the Spanish elections at the end of 2023. Whoever wins, will find that there is little cash to run the huge government, and that means higher taxes.
It’s always a good idea to come to the island and look around calmly, before starting a business. Check out what’s working, and what business you’d like to start. It’s a lot of hard work and sleepless nights. Doing business in Gran Canaria (or in Spain) isn’t as easy as it looks.
Here are a few business models that work almost without any marketing. Some of them may take a couple of years to set up. All of them have some sort of barrier to entry, against competition:
Pharmacies: These have the monopoly to sell medicines and have limited locations. To open a pharmacy, you will need to buy one from a pharmacist that is retiring or wants to sell it (if no one from his family or pharmacists who are working there want to take over).
Depending on the location and turnover, prices can go up to a million euros. This is just for the running business and doesn’t include the property (or monthly rental) cost. If done properly, you’ll recover your investment within 10 years, probably less. You will need to find a pharmacist who is willing to manage it. His/her name will be on all the documents. It is recommended to have a tax/business advisor for a smooth transaction.
Lottery shops: The Spanish government has encouraged its citizens to spend their hard-earned money on the lottery since 1812. It’s part of the Spanish culture to buy lottery for Christmas. To open a lottery shop, you can contact the “Loterías del Estado” (State Lottery) office, if you want to open a shop in a new, developing area or shopping mall, where there isn’t any shop nearby. If you want to open a shop in a centrical location, the only option will be to buy it from someone who is retiring or not doing well. Prices start at 100.000 euros for this. Besides this, you will need a bank guarantee, to prove that you can be trusted to collect and pay on behalf of the government.
The main drawback of this type of business is long working hours. If you decide to open for less time, your customers will go somewhere else to buy their lottery tickets. Don’t expect to get rich. You will earn a few thousand euros and that’s it.
The key to being successful is to use the constant flow of people who come to buy lottery tickets, and sell other things to them. Lottery tickets have a low margin. Other things like cigarettes, liquor, and ice cream, will help raise your overall profit.
Vacation Rentals: Wait for the right opportunity and buy a small building. With rising interest rates, people won’t be able to afford mortgages. Prices are expected to drop in the next 2 years. Find a friendly bank manager of the big four banks, that will let you know when a foreclosed home is for sale. Also, keep in touch with a real estate agency so that they let you know when opportunities arise. Be patient. In 2022 prices are still high because of a lack of inventory and also lots of people have rushed to buy homes to lock in the low-interest rates. Prices will hit rock bottom in 2024 or later.
Supermarkets: People have to eat and drink, so it’s a recession-proof business. Gran Canaria has the most expensive supermarkets of all Spain! To quickly be successful, we recommend joining a supermarket franchise. Popular brands like “Spar” attract customers automatically. The initial investment for this franchise can be around 1400 euros per square meter. Another (lower cost) franchise brand that you may consider is “Unide”.
Petrol Station: This requires a little bit of study before getting in, and a bank credit line that comfortably lets you run the business. The government has been paying part of the petrol cost. Petrol station owners first have to give the rebate to the customers, and then collect the money from the government a few months later. When prices stabilize, it is a great business. The opportunity here lies in waiting for the right moment, to buy a station.
The average rents are as follows:
Retails shops: 800 euros up
Retail shops in shopping malls: 2000 euros and up
Offices: 300 euros and up, but if you want to start small, there are quality co-working spaces with reliable broadband internet, from where you can work, get advice, and pay an affordable fee.
Hiring employees in Spain is expensive. To make a rough estimate of this, add 30% on top of the salary that you have in mind. That is what you would pay to the government for social security costs, and other costs, for each employee you hire.
If you open a business, whether you have employees or not, you will have to pay social security for yourself. This will be calculated from 2023 depending on your net income, and starts at around 300 euros per month. It will be drawn from your account whether you make money or not. Most business owners and professionals consider it unreasonable, especially if they get by every month with one or two thousand euros (which is what the majority make).
To set up a Gran Canaria business, you will need the help of a qualified accountant, tax advisor, and labour advisor. Dealing with the government on your own is not recommended. It is difficult and time-consuming. The level of bureaucracy can be overwhelming.
If you are an independent professional or want to be self-employed, all the paperwork to open a Gran Canaria business can be finished in only 24 hours!!!!
If you’re just starting, or have no idea whether your business model will be successful, then setting up a business as an individual entrepreneur would be the way to start. Then, when turnover picks up, it is always easy to incorporate. Not only will you save money, but also the time in doing admin tasks (accounting, tax filing, etc.).
All limited liability companies have to maintain proper accounts (according to the Plan General de Contabilidad, or General Accounting Plan, which is a set of standarized accounts and account numbers) , and submit them once a year to the tax authorities. Taxes have to be paid every quarter, and require papers to be filled in. Each worker hired or fired also requires certain paperwork to be done.
It takes a few weeks to set up a Gran Canaria business (limited liability). Here’s a summary of the things that have to be done and how long each takes.
1) Choose a company name and register it (3-5 days).
2) Open a bank account, and transfer money from your country to this account, if what you give as capital for the company is cash. This money will remain blocked until you finalize step number 7).
3) Public notary will prepare the company documents (2-3 days)
4) Documents have to be signed
5) Receive documents from the notary (4-5 days). Next day you can apply for a provisional CIF company registration tax number, and request the company to be set up legally
6) The company is registered in the commercial register (Registro Mercantil). (15-20 days).
7) Definite tax number is given to you. Take this number to the bank and unblock your account and start operating.
Disclaimer: Please seek proper advice before opening a business. We aren’t accountants or business advisers. Running a business is hard and can rarely run on autopilot if you have to deal with people whom you’ve not trained yourself. Not everyone is fit to run a business; you need to be able to solve problems every day, and will probably have sleepless nights. Tax rates are being raised in Spain every year.