Selling to the Canary Islands: No VAT, 7% IGIC, DUA

You charge no VAT. A sale of goods or of B2B services to the Canary Islands leaves the EU VAT territory, so the VAT line on your invoice is zero. Your buyer then pays IGIC when the goods clear customs — 7% if the goods fall under the general rate, nothing at all below 150 euros.

That is the whole answer. The rest of this guide is about the three things that go wrong after it: which article you cite, who fronts the tax, and the one case where you do charge VAT to a Canary Islands customer.

The Canary Islands sit inside the EU customs union and outside EU VAT

This is the double status that confuses everyone, and both halves are written down.

For customs, the islands are in. Article 4(1) of the Union Customs Code defines the customs territory as including “the territory of the Kingdom of Spain, except Ceuta and Melilla”. The Canaries are not excepted. Goods moving there are Union goods.

For VAT, the islands are out. Article 6(1) of the VAT Directive disapplies the Directive to a list of territories that do form part of the customs territory, and its letter (b) is the Canary Islands. Spanish law mirrors it: article 3.Dos.1.º.b) of Ley 37/1992 excludes Canarias as a territory “excluded from the harmonisation of turnover taxes”, and article 3.Dos.3.º then classes anything outside that perimeter as territorio tercero.

Article 1(3) of the Customs Code is what makes customs machinery available here: customs legislation “including the simplifications for which it provides” applies to trade between parts of the customs territory where the VAT Directive applies and parts where it does not. The declaration itself is then imposed by Canarian rules — the Orden of 29 July 2016, amended on 29 July 2021, which is also what exempts low-value consignments from the DUA. No tariff, but a declaration. That declaration is the DUA.

Goods: no VAT on your invoice, IGIC at the DUA

If you ship goods to the Canary Islands, you invoice without VAT. The legal basis depends on where you ship from, and mixing the two is the most common drafting error.

From mainland Spain or the Balearics. Article 21 of Ley 37/1992 splits the export exemption in two, and which half you cite depends on who books the carrier. Point 1.º covers goods “dispatched or transported outside the Community by the transferor or by a third party acting in his name and on his behalf” — you arrange the transport. Point 2.º covers the same goods when they are dispatched “by the purchaser not established in the territory of application of the tax, or by a third party acting in his name and on his behalf” — your Canary Islands buyer arranges it, which is the normal Ex Works or FCA case. Either way the Canaries are outside the Community for VAT and the shipment is an exempt export; the number after the article is not.

Note the opening words of article 21: the exemption applies “en las condiciones y con los requisitos que se establezcan reglamentariamente”. It is conditional on evidence that the goods actually left. Keep the export declaration with the invoice — the invoice note alone does not carry the exemption.

From another Member State. Your exemption is not article 21 of a Spanish law. It is your own national implementation of article 146(1)(a) of the VAT Directive, which requires Member States to exempt “the supply of goods dispatched or transported to a destination outside the Community by or on behalf of the vendor”. A German seller cites the German provision; a Dutch seller cites the Dutch one.

Same result, different footing. Citing a Spanish article on a German invoice is not a rounding error, it is a wrong reference.

Services: the place-of-supply rule pulls you out of VAT

Services never travel through customs, so there is no DUA and no export exemption. They drop out of VAT for a different reason: they are not located where you are.

Article 69.Uno.1.º of Ley 37/1992 places a service supplied to a taxable person where that customer has the seat of its economic activity, “regardless of where the supplier is established and of the place from which he supplies them”. Article 44 of the VAT Directive says the same in EU-wide terms. Your client’s seat is in the Canaries. The Canaries are not the Spanish VAT territory. So the supply is not subject, and no VAT is charged.

Note the wording carefully: goods are exempt, services are not subject. Exempt means inside the tax and relieved. Not subject means outside its scope entirely. The invoice note is not the same for both.

Who actually pays the 7%, and why it never touches your invoice

The rate is not in dispute. Article 32.1 of Decreto Legislativo 1/2025, of 13 October (BOC no. 207, 20 October 2025) states: “El tipo general en el Impuesto General Indirecto Canario es el 7 por ciento, siendo aplicable a las entregas, importaciones de bienes y prestaciones de servicios que no se encuentren sometidas a ninguno de los otros tipos impositivos…”

Seven per cent is the general rate, not the only one. Articles 33 to 41 of the same text set a zero rate, a 3% super-reduced rate, a 5% reduced rate and increased and special rates that reach well above the general one for vehicles, vessels, aircraft and a handful of other categories. Check the rate for your product before you quote a landed cost.

Who owes it is equally explicit. Article 21 of Ley 20/1991 makes the taxable person on imports “those who carry them out”, and defines importers as “the recipients of the imported goods, whether purchasers, transferees or owners… or consignees acting in their own name”. That is your customer, not you.

The base is not the invoice total either. Article 25 of Ley 20/1991 adds to the customs value any tax due on importation — excluding IGIC and AIEM themselves — plus “accessory and complementary costs such as commissions, packaging, carriage, transport and insurance arising from entry into the Canary Islands to the first place of destination” inside them.

So the 7% lands on a figure slightly above what you billed, is paid by someone else, and is invisible on your paperwork. That asymmetry is exactly what surprises buyers who were quoted a delivered price.

Decision tree: goods or services, B2B or B2C

What you sell	Your customer	VAT on your invoice	Who settles the Canary tax
Goods	Business or consumer	None (exempt export)	The buyer, as importer of record, at the DUA — or an H7 declaration with no IGIC below 150 euros
Services	Business established in the Canaries	None (not subject)	The client self-assesses IGIC
Services listed in art. 69.Dos (advertising, consulting, legal, accounting, engineering, data, translation…)	Private individual in the Canaries, supplier in mainland Spain	Spanish VAT applies	Nothing
Electronic, telecom or broadcasting services; services on property in the islands; services physically performed there	Private individual in the Canaries	None (art. 70.Uno.1.º, 4.º, 7.º locate them outside the Spanish VAT territory)	Nothing

Row three is the narrow case, not the general one. Article 69.Dos closes the escape hatch only for the services it lists. Services with their own place-of-supply rule in article 70 — anything electronic, telecom or broadcast, anything tied to a property in the islands, anything physically performed there — follow that rule instead and fall outside the Spanish VAT territory even when the customer is a private individual.

The self-assessment in row two has a name and an article. Article 19.1.2.º.a) of Ley 20/1991 reverses the taxable person onto the recipient — and only onto a recipient that is an entrepreneur, a professional, a public body or a legal person — whenever the operations “are carried out by persons or entities not established in the Canary Islands, unless the recipient is in turn not established in that territory”. Your client books the IGIC on both sides of its return. You do nothing.

The wording your invoice must show

For the goods case, the requirement is literal. Article 6.1.j) of Real Decreto 1619/2012 says that where the documented operation is exempt, the invoice must carry “a reference to the corresponding provisions of Directive 2006/112/EC, or to the corresponding precepts of the VAT Law, or an indication that the operation is exempt”.

Any of the three satisfies it. Pick the precise one:

That third line deserves a note. Article 6.1 of the invoicing regulation lists mandatory content “without prejudice to the possibility of including any other mentions”. The exemption note in point j) covers exempt supplies, so it fits goods. An out-of-scope service is not an exempt supply, so no listed mention is strictly triggered — but leaving a bare zero with no explanation is what makes a client’s accountant call you. Write the reason in as a free-text mention.

Worked example: a 4,000 EUR shipment from Berlin to Las Palmas

A Berlin company sells 4,000 EUR of goods to a business in Las Palmas. Commercial assumptions, not tax figures: 340 EUR of freight to the port of entry, 60 EUR of inland delivery to the buyer’s warehouse, which the transport document names as the first place of destination — article 25.2.º takes that document as the reference, so if it stopped at the port these 60 EUR would stay out of the base — and goods not listed in Annex I of Ley 4/2014 so no AIEM.

Line	Amount	Note
Goods on the German invoice	4,000.00 EUR	Exported, no German VAT
VAT charged by the seller	0.00 EUR	Art. 146(1)(a) Directive 2006/112/EC
Customs value declared on the DUA	4,340.00 EUR	Goods plus freight to point of entry
Inland leg to first destination	60.00 EUR	Added by art. 25.2.º Ley 20/1991, because the transport document names the warehouse
IGIC base	4,400.00 EUR
IGIC at 7%	308.00 EUR	Art. 32.1 Decreto Legislativo 1/2025
AIEM	0.00 EUR	Not in Annex I, Ley 4/2014

The seller collects 4,000.00 EUR. The buyer pays 308.00 EUR of IGIC, plus whatever the customs agent charges for filing, and deducts the IGIC on its next return with the DUA as the supporting document. The importing side of this transaction is a different set of obligations from yours.

Three mistakes that make your client pay twice

Charging your own VAT anyway. The client pays your 21% or 19% and then pays 7% IGIC at the border. Recovering the first one means a credit note and a corrected return on your side. Configure the customer’s country and region before the first invoice, not after the complaint.

Undervaluing the shipment to “help” the buyer. Two problems. The customs value is not yours to compress, and the declared value is the only figure your client can deduct against. Understate it and your client carries a deduction below the goods’ real cost, while any later reassessment — tax, interest and penalty — lands on him as importer of record under article 21, not on you.

Assuming small parcels are free of everything. Article 14.11 of Ley 20/1991 exempts “imports of goods whose global value does not exceed 150 euros”, except alcoholic products under CN codes 22.03 to 22.08, perfumes and eaux de cologne, and raw or manufactured tobacco. Below the threshold the simplified H7 declaration replaces the full DUA. But per the ATC’s own H7 instructions, AIEM has no low-value exemption, so goods in Annex I of Ley 4/2014 cannot use H7 at any amount.

When repeated Canary Islands work forces you to register with the ATC

The reverse charge in article 19.1.2.º.a) is what keeps most non-established sellers out of the Canary tax system. It has limits, and the same article names them.

It stops applying when your customer is also not established in the islands — then you are the taxable person on a supply located there. It is expressly disapplied to letting of immovable property that is subject and not exempt, and to intermediation in the letting of immovable property. And it is irrelevant once you have a fixed place of business in the islands, because at that point you are established and file like any local business.

At that stage you are inside the IGIC system properly: periodic returns to the ATC, IGIC charged on your outgoing invoices, and IGIC recovered on your costs. Our breakdown of every IGIC rate in force covers which one applies to what, and the IGIC versus IVA comparison covers the two systems side by side.

Where Frihet fits

The two references are not interchangeable text, and that is the part worth getting right whatever you invoice from: goods carry the export-exemption reference, services carry the place-of-supply reason, and a bare zero with no explanation is what makes your client’s accountant call you. Decide the wording once, per case, and keep it identical across every Canary Islands invoice you issue.

If your own tax seat is in the Canary Islands, Frihet works from the fiscal zone set on your workspace: invoicing runs on IGIC rather than peninsular VAT, and the quarterly figures feed a modelo 420 draft you review, not a return the app files for you.

You can test it on the free plan, which includes 999 invoices a month and does not ask for a card. Pro is 9 EUR a month and Premium 29 EUR a month; the full breakdown is on pricing.

This guide is general information dated 2026. Your specific transaction, and especially anything involving AIEM classification or a possible fixed establishment, is worth checking with your tax adviser.