Buying Property on La Palma as a German Citizen: Tax, Inheritance and Residency — The 2026 Guide

The Canary Islands are part of Spain and the European Union, but they sit outside the harmonised VAT area. Instead of Spanish IVA (21%), the archipelago applies the IGIC (Impuesto General Indirecto Canario), with a standard rate of 7%. For construction, renovation and the purchase of new-build property directly from developers, that is a tangible saving — and one of the reasons the tax framework of the Canary Islands matters to long-horizon buyers.

For resale property, the applicable tax is Spain's transfer tax ITP (Impuesto sobre Transmisiones Patrimoniales). On the Canary Islands the current rate is 6.5%, meaningfully lower than the 8–10% typical of many mainland regions. On a €600,000 resale, ITP is therefore around €39,000 — comfortably below the equivalent German cost of a comparable purchase plus Grunderwerbsteuer and notary fees.

In addition to ITP, buyers should budget for notary fees, land registry, gestoría and — where represented — legal fees. In aggregate, German buyers should expect total transaction costs of around 8–11% on top of the purchase price. Our fees page breaks this down.

On the German side, the purchase itself triggers no German VAT or Grunderwerbsteuer. The German tax office only engages with the asset once it produces income — rents, capital gains on sale, or an inheritance or gift event.

The 2013 DBA between Germany and Spain follows the OECD model. For real estate, the situs principle applies: rental and capital income are taxed where the property is located — Spain. Germany typically exempts these income streams under progression (Progressionsvorbehalt), meaning they are not taxed twice, but they raise the German rate applied to the rest of your income.

On sale, the right to tax the capital gain also sits with Spain. Non-resident sellers pay the IRNR at a flat 19%. Practically important: the buyer withholds 3% of the purchase price at notary as a prepayment to the Spanish tax office when the seller is a non-resident. Many German sellers only discover this on completion day.

As long as the buyer's tax residence remains in Germany, they are only limitedly taxable in Spain. For self-use — an unrented second home — Spain applies a deemed income tax on 1.1% or 2% of the cadastral value, taxed at 19%. For a typical La Palma home, that is a few hundred euros per year.

If the property is let — including short-stay lets via holiday platforms — net rents are declared quarterly via Modelo 210. EU citizens can deduct expenses on a pro-rata basis; the tax rate is again 19%. Add local IBI (property tax), waste charges and — for larger estates — Spanish wealth tax, whose allowances and treatment of non-residents in the Canary Islands are now materially more attractive than in regions such as the Balearics.

For German owners on La Palma, inheritance is consistently the most underestimated issue. Under the EU Succession Regulation (Regulation 650/2012), the default is the law of the deceased's last habitual residence. A German who has moved permanently to La Palma will, by default, be subject to Spanish succession law — including forced-heirship rules that differ substantially from Germany's.

Germans can expressly elect German law in their will (choice of law under Art. 22). This clause belongs in every will of a German with property in Spain, irrespective of whether they still reside in Germany or on the island. Without it, carefully planned German estate structures can unravel against Spanish forced-heirship rules.

On the tax side, Spanish inheritance and gift tax is a regional matter. The Canary Islands grant reductions of up to 99.9% for close relatives (spouses, children, grandchildren). In practice, the effective inheritance tax on a La Palma property within the immediate family is often nominal. Germany taxes the same estate in parallel; the tax paid in Spain is credited under the DBA.

Anyone spending more than 183 days per calendar year in Spain, or whose centre of vital interests is there, is a Spanish tax resident — with a worldwide filing obligation. For many German buyers who initially plan only a second home on La Palma, this becomes a real question after a few years.

The transition from German to Spanish tax residence can be structured, but it needs planning. Points to address include: deregistration in Germany, treatment of German pensions and investment income, potential exit taxation under § 6 AStG for material GmbH holdings, health insurance coverage via the S1 form or a private route, and whether the Spanish inbound regime for new residents (Ley Beckham) applies in your specific case.

Once you are a Spanish tax resident and hold foreign assets — typically German — above €50,000 per category (bank accounts, securities, real estate), you must declare them via Modelo 720 to the Spanish tax office, both initially and on material changes. The previously punitive penalties have been curtailed following an ECJ ruling; the reporting obligation itself remains.

On the German side, as long as German tax liability exists, the La Palma property must appear on Anlage V / Anlage AUS of the German income tax return. German tax authorities now enjoy automatic exchange of information with Spain — assuming discovery risk is low is not a strategy.

Notarial deeds on La Palma are read aloud and signed in Spanish. Buyers without sufficient Spanish require a sworn interpreter or a written translation — otherwise the notary has valid concerns about the deed. In practice, German buyers today expect more: continuous German-language support that covers not only language but also expectation management, cultural differences and the timeline of Spanish administrative processes.

This is the work we do. La Palma Exklusive accompanies German buyers from the first viewing through NIE, lawyer coordination and contract review to notary and post-completion — in German, with direct access to the lawyers and tax advisors we have worked with for years. Buyers who have already read the German-language buyer's guide will find the legal and tax deep dive here.

The first mistake is structural: buyers apply German mental models to Spain one-for-one. The Spanish land registry (Registro de la Propiedad) has a different legal quality than the German Grundbuch, the notary plays a different role, and the contrato de arras is a reservation contract with real legal consequences — not the non-binding letter of intent it is occasionally mistaken for.

The second is fiscal: acquiring the property through a German GmbH or a Spanish SL because a friend 'did it that way'. In the vast majority of private situations, direct acquisition as an individual is more tax-efficient — particularly for inheritance and eventual sale. Structuring can be sensible, but it belongs before the purchase, not after.

The third is procedural: underestimating the time required for NIE, bank account and powers of attorney. Buyers acquiring from Germany should have these in place three to six weeks before the intended notary date, not the week before.