IGIC vs IVA Canary Islands 2026: Rates & What to Charge

What is IGIC?

IGIC (Impuesto General Indirecto Canario, the Canary Islands General Indirect Tax) is the consumption tax charged in the Canary Islands instead of Spanish IVA (VAT). Its general rate is 7%, against 21% IVA on the mainland. It is managed by the Canary Islands Tax Agency (Agencia Tributaria Canaria, ATC), not by the national AEAT, and businesses declare it quarterly on Modelo 420.

Why no IVA in the Canary Islands? Spanish IVA law excludes the Canary Islands from its territory because they are outside the area where EU turnover taxes are harmonised (Ley 37/1992, art. 3). The islands apply IGIC under their own Economic and Fiscal Regime (REF), which compensates for insularity and distance.

IGIC Rates 2026 vs IVA Rates

The current IGIC rates are set by article 32 of the consolidated IGIC text (Decreto Legislativo 1/2025, BOC no. 207 of 20 October 2025). Which goods fall in each band is listed in articles 33 to 41.

For comparison, mainland Spain and the Balearic Islands apply IVA at 21% (general), 10% (reduced) and 4% (super-reduced):

Applying the wrong rate means collecting and declaring the wrong tax, which can lead to penalties. Frihet applies the IGIC rate you assign to each invoice line once your company is registered as Canary Islands-based.

Invoicing with IGIC: Rules for Operations Inside and Outside the Canary Islands

Which tax appears on each invoice depends on one factor: your client’s location. The rules change completely depending on whether the operation is internal to the archipelago or involves the mainland, Europe, or the rest of the world.

Domestic operations — sales to clients (companies or individuals) located anywhere in the Canary Islands — are straightforward: apply the relevant IGIC rate. Your invoice must show the taxable base, the IGIC rate applied, and the resulting tax amount. Whether your client is in Tenerife and you are in Gran Canaria makes no difference; for tax purposes it is a domestic Canary Islands operation.

When you sell to clients outside the Canary Islands — mainland Spain, the Balearic Islands, Ceuta, Melilla, another EU country, or a third country — a sale of goods is an export. Exports are IGIC-exempt (services follow the place-of-supply rules and are, as a rule, not subject to IGIC when supplied to a business established outside the islands). Your invoice is issued without this tax, but must state that it is an “IGIC-exempt operation due to export” and cite the relevant legal basis. IGIC-exempt does not mean untaxed: the tax is settled at the destination. A Madrid client buying physical goods from you will typically pay IVA on the import DUA when the package clears customs.

Purchases from the mainland or abroad are imports. When your Canary Islands company buys goods from a Barcelona supplier, the invoice you receive will have no IVA (it is an exempt export for your supplier). But when the goods clear Canary Islands customs, the corresponding IGIC must be paid — typically managed through the Single Administrative Document (DUA), which your transport company or customs agent will handle, passing the import IGIC cost on to you. This borne IGIC is, in most cases, deductible in your quarterly Form 420.

This three-way split — domestic, export, import — governs every tax operation you perform. Set the tax treatment on each invoice according to this split: 7% IGIC for a client in La Palma, export exemption for goods sold to a client in Madrid. The Canary Islands sit outside the EU VAT territory (Directive 2006/112/EC, art. 6.1.b; Spanish VAT Act 37/1992, art. 3.Dos.1.b), so there are no intra-community supplies and no One Stop Shop (OSS) from there.

IGIC for Self-Employed Workers and Companies: Key Tax Obligations

Operating in the Canary Islands means complying with specific obligations before the ATC. The forms and special regimes are as important as getting your rates right.

The two most critical IGIC filings are Form 420 and Form 425:

• Form 420 is the quarterly (or monthly, for large companies) IGIC self-assessment. You declare the IGIC you have charged on sales and the IGIC you have borne on purchases. The difference determines whether you pay or receive a refund.
• Form 425 is the annual summary — an informative return consolidating all operations for the year. It must match the sum of your four quarterly Form 420s.

For freelancers and small business owners, there is an alternative that eliminates most of this bureaucracy: the Special Regime for Small Business Owners and Professionals (REPEP). Natural-person professionals whose annual turnover stays below the legal limit can elect REPEP — and in 2026 that limit is €30,000; the general €50,000 limit applies from 1 January 2027 under Decreto-ley 3/2026 of 6 April. Those who invoiced more than €30,000 and up to €50,000 in 2025 could only join through the extraordinary window from 1 to 31 July 2026. The main benefit: no quarterly Form 420 and no IGIC charge on invoices. The trade-off: you cannot deduct the IGIC you pay on purchases. REPEP is ideal if your activity has low costs; if you make significant investments, sticking to the general regime usually yields a better net outcome by letting you recover purchase IGIC.

The manual preparation of these forms is time-consuming and error-prone. A single transcription mistake can throw an entire declaration out of balance and trigger interest charges. Frihet reduces that risk: it calculates the Modelo 420 boxes from the invoices and expenses you have already recorded, so you review figures instead of retyping them.

Practical Cases: E-commerce, Digital Services, and Errors to Avoid

Tax theory is most useful when applied to real scenarios. Here are the most common situations businesses in the Canary Islands face.

Case 1: A fashion e-commerce in Tenerife

Your online clothing store is tax-domiciled in Tenerife. On the same day you sell the same T-shirt (taxable base €50) to three different customers:

1. Client in Las Palmas de Gran Canaria: Domestic Canary Islands operation. Apply 7% general IGIC. Invoice total: €50 + €3.50 IGIC = €53.50. Declare the €3.50 charged IGIC in Form 420.
2. Client in Madrid: Export to mainland Spain. IGIC-exempt. Invoice: €50, with a legal note citing the export exemption. The transport company manages the import DUA; the Madrid client pays 21% IVA on receipt.
3. Client in Berlin: Export of goods to an EU country. IGIC-exempt. Invoice: €50. The Canary Islands are outside the EU VAT territory (Directive 2006/112/EC, art. 6.1.b), so this is not an intra-community supply and the One Stop Shop (OSS) does not apply; any IVA is settled on import in Germany.

Case 2: A freelance digital marketing consultant in Fuerteventura

You offer online consulting services. Your clients span the globe.

• Invoice to a company in Barcelona: Service to a business outside the islands — as a rule not subject to IGIC. B2B within Spain means the reverse-charge mechanism applies: the Barcelona company self-assesses the IVA in its own declarations.
• Invoice to a startup in the United States: Service to a third country — as a rule not subject to IGIC. Issued without Spanish taxes. Destination-country tax treatment depends on the specific US state.

Common and costly errors

• Applying IGIC to an export: Charging IGIC to a mainland client is a serious mistake. You collect a tax you should not have charged, must pay it to the ATC anyway, and complicate accounting for both parties.
• Overlooking the import DUA cost: Buying from a mainland supplier without budgeting for the 7% import IGIC plus DUA handling fees can destroy your margins. Anticipate this cost.
• Confusing exempt with not subject: An IGIC-exempt sale (export) must still appear in your accounting and be reported informatively on Form 420. An operation that is “not subject” is entirely outside the tax scope and is not declared at all.
• Missing AIEM: Beyond IGIC, some imported goods carry AIEM (Arbitrio sobre Importaciones y Entregas de Mercancías en Canarias), a levy protecting local production. Not knowing AIEM exists leads to unexpected costs on specific categories.

How Frihet Automatically Simplifies IGIC and IVA Management

Tax management in the Canary Islands is a labyrinth of rates, forms, and cross-border trade rules. Spreadsheets and manual invoicing multiply both the time cost and the error risk. Frihet is built to eliminate that burden so you can focus on growth.

Intelligent tax configuration from day one. When you register your company in Frihet and set the Canary Islands as your tax domicile, IGIC logic activates across all operations. Your invoices default to IGIC, and you choose the export exemption for goods sold to clients outside the islands: 7% IGIC for a client in La Gomera, export exemption for goods sold to Seville.

Real-time cash flow visibility. Because Frihet keeps charged and borne IGIC in the same place as your invoices and expenses, the Modelo 420 preview shows what you would owe before the quarter closes.

Quarter-end in minutes, not hours. Frihet calculates the Modelo 420 boxes from your recorded transactions and shows them as a free preview; the PDF export is on the Pro plan. You review the figures and file on the ATC’s electronic platform.

Global scalability. Operating from the Canary Islands is a tax advantage, not a limitation. Frihet handles IGIC and the export exemption, and lets you invoice in multiple currencies. Your business grows without compliance bottlenecks.

Frequently Asked Questions

Does a self-employed person in the Canary Islands have to declare IVA?

No. A self-employed person or company with a tax domicile in the Canary Islands pays IGIC, not IVA. All obligations — quarterly Form 420, annual Form 425 — are submitted to the Canary Islands Tax Agency (ATC), not the national AEAT.

What IGIC rate applies to professional services in 2026?

Most professional services (consulting, design, marketing, and similar) billed to clients within the Canary Islands carry the 7% general IGIC rate. Services supplied to a business established outside the archipelago are, as a rule, not subject to IGIC.

How do I invoice a client in the Canary Islands from mainland Spain?

A mainland-to-Canary-Islands sale is an IVA-exempt export. Issue the invoice without IVA, cite the legal exemption basis, and note that your Canary Islands client will settle the corresponding IGIC through the import DUA on receipt of goods.

If I buy online from a mainland store, do I pay IVA or IGIC?

You will not pay the 21% IVA shown on the store’s website. When you enter a Canary Islands shipping address the store removes IVA. When the package clears customs in the Canary Islands you pay IGIC (typically 7%) plus DUA handling fees charged by the carrier or customs agent.

What is REPEP and who qualifies in 2026?

REPEP (Special Regime for Small Business Owners and Professionals) is available to individual freelancers whose annual turnover stays below the legal limit — €30,000 in 2026 and €50,000 as the general limit from 1 January 2027 under Decreto-ley 3/2026 (with an extraordinary option in July 2026 for those who invoiced €30,000 to €50,000 in 2025). Qualifying means no quarterly Form 420 filings and no IGIC on your invoices — in exchange for not deducting purchase IGIC. It is ideal for freelancers with low costs.

Is IGIC the same as IVA?

No. IGIC and IVA are distinct taxes. IGIC applies only in the Canary Islands, is administered by the autonomous community through the ATC, and has a general rate of 7%. IVA applies on the mainland and in the Balearic Islands, is administered nationally by the AEAT, and has a general rate of 21%.