Gran Canaria Business: What Business to Start

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: April 2023)

Tax Incentives for Investing in Gran Canaria

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 (Expected) Economic Slowdown

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 200+ euros.

Gran Canaria Business: Recession-Proof Businesses that You Can Start

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 Gran Canaria 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 2024 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 2025 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 research 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.

Seniors: The aging population throughout Spain is a huge opportunity for business. Whether it is senior homes, day care centres, doctor's facilities, home assistance...all these are great ideas for a business. The next generations (gen Xers and milennials) aren't having many kids either. The reason is that they can't afford to have kids, and instead prefer to keep dogs. This means that the business opportunity will get even bigger, unless the government starts to hand out checks for each baby born, but the problem won't be solved any time soon.  

Watch repairers: There is just a handful of them, and the next generation isn’t interested. Eventually, there will be even less.

Allergies: This is a hugely profitable niche. When the wind blows towards the east, sand from the Sahara comes in. A significant portion of the local population is allergic. This percentage increases every year. This is a great Gran Canaria business especially if you attack the problem from a different angle, i.e. integrative medicine, and treat patients from other nearby islands.

Health: The public health system cannot handle the post-Covid demand due to the aging population. Doctors are overworked and burnt out. Patients may have to wait up to week to receive a simple phone consultation. Small or medium hospitals or doctors’ consultation offices (these usually have agreements with major health insurance companies that send them clients) are doing well.

Skin doctors: Compared to other parts of Spain, the Canary Islands have a high skin cancer rate and other issues caused by dust mites, like eczema.

Pest control: This is an excellent business if done right. Gran Canaria has pest problems: cockroaches and the California king snake. The government is trying to eliminate them and always needs help from private companies specialising in this.

Virtual restaurants: These are also known as "dark kitchens" or "cloud kitchens" and are increasing in the whole country. Once you get a permit from the city council, which can take up to a year, you can generate a profit with low overheads. These restaurants only do deliveries.  

Heat-related: With temperatures increasing every year, in the summer there is a shortage of air-conditioning equipment and technicians. Fans also run out.

Security business: This is another recession-proof business. You can install cameras, doors, or even train people in self-defence. Spanish laws allow people to easily occupy homes that aren't theirs, unless you notify the police within a couple of days. This is why it is a massive business opportunity.

In this building near Las Canteras Beach, people living on the lower floors have placed signs to show that an alarm has been installed

The Pitfalls of the Hospitality Business

Okay, you’ve arrived in the Canaries and fallen in love with them. You want to settle down here and start a business. The first thing you’ll probably think of is a tourist-related business. Think twice. It’s not as easy as it seems. Here are a few mistakes people make when opening such a business:

• No Experience: Don't get into this type of business without any experience. Some people want to open a bar and hire the first waiter they've met on the first day to run the business. Then, six months later, when things aren't going well, they don't know how to course correct.
• Wrong location: If you expect people to come to eat at your place, location is very important. An example of a location where lots of businesses fail are calle Nestor de la Torre or calle Juan Manuel Durán, in Las Palmas. Although they may seem centrally located (near El Corte Ingles dept. stores, which would be thought to act as an economic powerhouse attracting customers), and that there is plenty of foot traffic, the business failure rate is high. Clients in the capital of Gran Canaria and the ones in the southern more touristic areas have a different spending power.
• Wrong food: Check if there is a demand for the type of food you want to offer before you invest 
• Low cash flow: If cash flow is lower than expected, and you don't have any money in the bank, you're in trouble. It's better to underestimate the initial sales volume, until the customers start loving your business.
• High rent: If you're paying too much and your sales volume is low,  you're out of business.
• Employee costs: You need to consider the wages, social security costs, and possible employee theft (this can be high if no controls are put in place).
• High delivery costs: The three leading delivery companies (Glove, UberEats, Just Eat) charge a high signup fee, a flat fee, plus a percentage of the total order. This works out to be 30-50% of the entire order. Although they guarantee more extensive visibility of your business, they can ruin it in the long run.
• Lawsuits: If you're buying a running bar or one that had to close down, always check if there are any lawsuits against them. In Las Palmas, there are streets where the bars have been ordered to close early. Neighbours living nearby sued the city council because of the noise and not doing anything to solve the problem.

Commercial Premises Rents

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 Staff in Spain

Hiring employees in Spain is expensive. To make a rough estimate of this, add 35% 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.

Social Security for self-employed entrepreneurs

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).

The Biggest Nightmare for Doing Business in the Canaries

If you're operating a business that needs certain goods, you need to figure out how to get them in or out of the islands. Finding a reliable transport company that doesn't rip you off can be hard at times. Once you figure out the logistics, you will be fine.

Sending goods between the islands, especially if they're not the main ones (Gran Canaria and Tenerife) usually takes a day or two, sometimes more. The "fragmented" nature of the islands can be another challenge while setting up a business. This is good if you're able to do a good forecast of what's in demand, and also in the smaller islands you can fetch a higher price. 

Another problem that some businesses have is a lack of cashflow. It is important to have a few different sources of income, when you open a business, e.g. online, offline, wholesale, etc. 

How to Set up a Gran Canaria Business

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.).

Setting Up an LLC (Limited Liability Company or "Sociedad Limitada")

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.

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