The Canary Islands have many qualities, apart from being a magnificent place to go on vacation or to choose to live during a well-deserved retirement. The Canary Islands pose the optimum destination to start a business in the hospitality sector, with an excellent flow of tourists from all over the world providing a constant footfall in hotels, bars and restaurants.

Furthermore, the tax regime is extremely favourable, allowing a business to be put into operation with far lower fiscal costs compared to Italy and many other countries. However, this does not mean that the Canary Islands tax system should be interpreted as a “tax haven” as many people may think there are fiscal obligations to be met.  

A business can be opened in various ways, you can start up as self-employed or by creating a company.  The first option is the fastest and most economical, on the other hand a limited liability company may be the best option as, should the business not go well, the creditors of the company can only act against the company and not the directors, which protects the directors.  

The Canary Islands’ tax regime has considerably lower tax costs, compared to Italy; for example VAT in Italy has a general rate of 22%. In the Canary Islands the tax equivalent to VAT  – the Canary Islands General Indirect Tax (I.G.I.C.), has a general rate of 6.5%. If you want to manage the business as an autonomous entrepreneur, the tax regime follows a progressive scale according to the number of years the business has been in existence. The first year, € 60 per month is paid to Social Security, in the first six months of the second year 50% of the general quota**, which is calculated on the profits generated, being a minimum quota of € 286.10, and in the following six months of the second year a 30% reduction is applied to the general quota.

Corporation Tax is 25%, but for newly created companies a reduced rate of 15% applies. Regarding the costs of premises, the current average rental price in Santa Cruz de Tenerife is €1,300.00 per month, while there is an average cost of  €170,000.00 to buy a commercial premises; the rental market in Las Palmas de Gran Canarias, on average, amounts to € 1,500.00 per month. The comparative costs in Italy in Milan and Palermo, the cities have been selected to demonstrate the range in Italy – Milan’s average rental price is € 5,000.00 per month and the sale price of € 350,000.00, however in Palermo the average rental price is € 2,000 per month and the sale price is around €150,000,00.  These prices are for premises already equipped and ready to start business, with no need to buy furniture or for have the premises fitted-out.

When considering staff costs, the figures listed below are calculated on the basis of salary only without adding other fixed or variable costs. In Italy, the general staff cost is € 2,604.91, however in Tenerife, according to the type of bar/restaurant, the minimum is €1,196.85 to a maximum €1,400.70 per month.  In Gran Canaria the minimum is €1,499.37 to a maximum is €1,695.37.

This information provides a broad overview as to how much it would cost to open a bar in the Canary Islands compared to the costs in Italy.  The costs may vary according to the type and size of the business you may be considering but they will allow you to have a general idea of the costs of starting such a business in the Canary Islands.

If you would like more information about how to establish any type of commercial activity in the Canary Islands, please contact us.