Michael Thompson is president of Atlantic-American Advisors, a leading financial and investment advice provider for Americans moving to and living in the Canary Islands.
The Canary Islands have emerged as an intriguing alternative to mainland Spain for Americans moving to Europe in 2025. While part of Spain, these islands operate under distinct economic frameworks that create unique opportunities and challenges. Before making your move, several crucial aspects of financial planning require careful consideration, from investment structures to tax obligations to banking arrangements. This article provides a comprehensive overview to guide your planning process.
- US brokerage accounts and retirement plan considerations
As an American in the Canaries, you’ll navigate both U.S. and EU financial regulations, plus special island provisions. EU rules prohibit residents from investing in funds without EU documentation, which includes most U.S. investments. Meanwhile, many U.S. brokerages simply close accounts of overseas clients. The islands’ Special Economic Zone (ZEC) adds another layer of complexity – and opportunity – to investment planning.
Regarding U.S. retirement plans, Americans in the Canaries can receive distributions, but Spanish authorities may not recognize certain U.S. retirement tax benefits. This means distributions often face Spanish taxation. Currency fluctuations between the dollar and the euro add another consideration for both contributions and distributions.
- US taxation
American citizenship-based taxation continues regardless of location. You must file U.S. taxes on worldwide income even after moving to the Canaries, while also handling Spanish and local tax obligations if you qualify as a resident. You’ll need to report foreign bank accounts through FBAR, and potentially file Form 8938 depending on foreign asset values.
The Foreign Tax Credit helps avoid double taxation based on Canarian taxes paid, but strategic planning becomes essential. Consultation with a U.S. expat tax expert familiar with Canarian specifics often proves crucial for optimal filing approaches.
- Canarian taxation
The islands’ tax system differs notably from mainland Spain. While you’ll pay Spanish income tax as a resident, the Canaries use IGIC (7%) instead of mainland Spain’s 21% VAT. The Spanish wealth tax applies but with island-specific thresholds and exemptions. You must report non-Spanish assets on Modelo 720, just like mainland residents.
The ZEC framework offers qualified businesses a 4% corporate tax rate, but this requires careful structuring and meeting specific employment and activity requirements. Tourist income faces particular scrutiny and regulation within the islands’ economy.
- Banking
Banking in the Canaries requires a dual approach. Most Americans maintain their U.S. accounts while establishing local banking relationships. The major Canarian banks understand American needs, with Banco Santander and Sabadell offering specialized international departments familiar with FATCA requirements and U.S. reporting obligations.
Unlike mainland Spain, Canarian banks are well-versed in handling tourist rental income and international business transactions. Digital banking options like N26 or Wise provide useful bridges during transition, but establishing a relationship with a local Canarian bank proves essential for long-term residence, particularly for tourist rental income or ZEC company operations.
- Real estate
Real estate in the Canaries operates under distinct rules from both mainland Spain and the U.S. While the Golden Visa program exists, the islands offer additional considerations regarding tourist rental zones and licenses. Properties in designated tourist areas must adhere to specific rental regulations, creating both opportunities and restrictions for investors.
The purchase process differs significantly from American procedures. The unique Canarian tourist licensing system requires careful attention – a property’s zoning directly impacts its rental potential and value. Unlike mainland Spain, tourist rental licenses in the Canaries attach to the property rather than the owner, making their presence or absence crucial to property valuation.
- International money transfer
Moving money between the U.S. and the Canaries requires strategic planning. While traditional bank transfers work, currency specialists like Wise or XE often provide better rates and lower fees. The islands’ status as a tourist destination means local banks are familiar with international transfers, but proper structuring can save thousands in fees.
Key timing considerations include:
- Tax payment deadlines in both jurisdictions
- Property purchase settlements
- Business operation transfers
- Pension and investment distributions
- Insurance
Healthcare in the Canaries combines private and public options differently from mainland Spain. Initial private health coverage remains mandatory for visa purposes, but costs run significantly lower than U.S. rates. Many Americans opt for international coverage that includes both U.S. and European care, particularly useful given the islands’ position as a transit hub.
Property insurance in the Canaries requires specific consideration of factors like salt air exposure and tourist rental coverage, elements often overlooked in mainland policies.
- Estate planning
Long-term residence in the Canaries necessitates estate planning under multiple jurisdictions. Spanish inheritance laws apply, but the islands’ autonomous status creates additional considerations. You’ll need wills in both countries, but special attention must focus on Canarian property regulations and tourist license inheritance.
Local inheritance tax rates differ from mainland Spain, and proper structuring becomes essential for assets like tourist rental properties or ZEC company shares. Working with advisors familiar with both U.S. and Canarian inheritance frameworks helps ensure proper asset transmission.
- Additional Considerations
The Canarian Autonomous Region offers unique opportunities beyond standard Spanish provisions. The ZEC framework, tourist rental market, and strategic location between Europe, Africa, and the Americas create distinct financial planning needs and opportunities.
For business owners and remote workers, understanding reliable digital infrastructure locations proves crucial. Unlike mainland Spain, the islands’ position as a digital nomad hub has driven development of specific areas with superior connectivity and business services.
Moving to the Canaries offers Americans a unique combination of European living standards, tropical climate, and specific financial advantages. However, success requires understanding both the opportunities and obligations of this distinct jurisdiction. Early consultation with financial experts familiar with both U.S. and Canarian systems proves invaluable for optimal structuring.
This article provides general information as of May 2025. Specific advice should be sought from qualified professionals familiar with both U.S. and Canarian regulations.
