IGIC vs IVA — how indirect tax really works in the Canary Islands

Sooner or later, everyone who moves to Fuerteventura or starts trading with the islands discovers the same thing: the tax on the receipt does not say IVA. It says IGIC — and it is smaller. Behind that pleasant surprise sits one of the most distinctive features of doing business in the Canary Islands, and one of the most misunderstood.

The islands are part of Spain and part of the EU, but they are outside the EU VAT territory. Spanish IVA simply does not apply here. In its place the islands levy their own indirect tax, the Impuesto General Indirecto Canario, with lower rates, its own tax agency and its own rules for anything that crosses the water. Get the logic once and everything follows; assume "it's just VAT with another name" and the surprises arrive with customs paperwork attached.

The rates, side by side

Mainland IVA runs at 21% general, 10% reduced and 4% super-reduced. IGIC's structure in 2026:

• 0% — a basket of essentials, including basic foodstuffs, water, medicines, books and press.
• 3% — the reduced rate, covering among others many manufactured goods and land transport.
• 7% — the general rate, the one most services and sales carry. Compare it with the mainland's 21% and you see why consumer prices differ.
• 9.5% and 15% — increased rates for specific categories, the 15% reserved for genuinely luxury items such as high-end vehicles and jewellery.
• 20% — the special rate for most tobacco products. And 2026 added a special 1% rate for petroleum-derived fuels.

The general-rate gap — 7% against 21% — is not an accident. It is deliberate policy under the islands' Economic and Fiscal Regime (REF), the same framework that produces the ZEC's 4% corporate tax and the RIC investment reserve.

One country, two indirect-tax systems

The practical consequences reach further than the rate:

Selling from the islands to the mainland is, for indirect-tax purposes, an export — you generally invoice without IGIC, and your mainland customer deals with import IVA on arrival. Buying goods from the mainland is an import into the Canaries: the goods clear customs with a DUA and import IGIC is due here. Freight forwarders handle the mechanics daily, but the cost and the cash-flow timing belong in your margins from day one.

Services follow localisation rules of their own. A consultant in Corralejo invoicing a Madrid company, a mainland platform charging a Canarian business, a foreign SaaS subscription — each lands under IGIC, IVA or neither depending on who the parties are and where the service is used. This is the area where we correct the most invoices, in both directions.

Your filings go to a different agency. IGIC is managed by the Agencia Tributaria Canaria, not the state AEAT: quarterly model 420 self-assessments and the annual 425 summary, alongside your normal state obligations. Two agencies, two calendars — our tax advisory page keeps a fiscal calendar with every deadline that matters here.

The small-business regime most owners don't know about

IGIC includes a genuinely useful special regime, the REPEP (régimen especial del pequeño empresario o profesional). Self-employed individuals established in the islands whose turnover in the previous year stayed at or below €30,000 can operate without charging IGIC at all — no IGIC on invoices, no quarterly 420s. The trade-off: you cannot deduct the IGIC you pay on your own purchases.

For a small service business with light costs — a teacher, a consultant, many trades — the simplification is often worth more than the lost deductions. And a 2026 change widened the door: a transitional rule from 1 July 2026 lets resident individuals opt in if their 2025 volume stayed within €50,000. Whether it suits you is arithmetic, not doctrine: we run the comparison in minutes.

Where newcomers get caught

After years of onboarding mainland and foreign businesses into the islands, the recurring traps are remarkably consistent:

• Invoicing with IVA from a Canary establishment (or IGIC from a mainland one). The tax follows the rules, not your letterhead — and correcting a year of wrong invoices is miserable.
• Forgetting import IGIC in e-commerce margins. Selling goods into the islands means customs clearance per parcel; the courier's handling fees surprise buyers and sellers alike.
• Assuming EU VAT mechanisms apply. There are no intra-community acquisitions here and OSS does not cover the islands — the flows that replace them are import/export flows.
• Missing the ATC calendar. The state deadlines are widely known; the Canarian ones less so. Two agencies means two sets of dates.

Get the setup right once

Indirect tax in the islands is not harder than on the mainland — it is different, and almost every problem we repair began with a mainland habit applied unchecked. If you are opening, relocating or expanding a business that touches the Canaries, our tax and accounting teams will set the IGIC side up correctly from the first invoice. Book a consultation — we reply within one business day.

Common questions

I'm a tourist — can I claim IGIC back when I leave?
Yes — since 2023 the islands run their own traveller-refund scheme (DIGIC): non-EU visitors can reclaim the IGIC on retail purchases when the refund comes to €40 or more, validating the electronic refund document at the port or airport on departure. Unlike the big commercial tax-free operators, it is managed directly by the Canary tax agency, without commissions.

My mainland supplier insists on charging me 21% IVA. Is that right?
For goods shipped to the islands, usually not — the sale is typically an export for them and an import for you. Ask for the invoice without IVA and expect import IGIC on arrival instead. Services need a case-by-case look.

Does VeriFactu apply to IGIC invoices?
Yes. Spain's certified invoicing rules attach to income tax, not to IVA — invoicing under IGIC does not exempt Canarian businesses from the 2027 deadlines.

Rates and thresholds verified in August 2026 with the Agencia Tributaria Canaria's published tables. Rules evolve — confirm the current position before acting.