IGIC (Canary Islands general indirect tax)

What it is

IGIC is the indirect tax on consumption in the Canary Islands. The Canary Islands Tax Agency describes it as the equivalent of mainland and Balearic VAT, except that its rate is much lower. The territorial point is in the VAT law itself: the Canary Islands are outside the scope of the harmonised EU VAT system, although they belong to the customs union.

How it works

The mechanism mirrors VAT. Supplies of goods and services made for consideration by businesses and professionals in the Canary Islands are taxable (article 4 of Law 20/1991). The business charges IGIC on its invoices and deducts the IGIC it paid on purchases and expenses tied to its activity, provided they are not put to unrelated use (article 28). Each quarter it works out the difference and pays it or offsets it with modelo 420. Imports of goods into the islands are taxed too.

Rates

According to the Canary Islands Tax Agency, the general rate is 7% and the reduced rate 3%, with in addition a zero rate (0%), increased rates (9.5% and 15%) and a special rate (20%). Since the reform by Law 31/2022 the rates are no longer set in the state law: article 27 of Law 20/1991 points to articles 51 to 61 of Canarian Law 4/2012. Check the rate of each product on the agency’s site before invoicing. The agency’s own FAQ dates the 7% to January 2020.

Who it applies to

Anyone making taxable supplies in the Canary Islands. A supply located on the mainland or in the Balearic Islands carries VAT, not IGIC, and where each supply is located depends on specific place-of-supply rules.

Common mistakes

• Charging VAT on a supply that is located in the Canary Islands, or IGIC on a mainland one.
• Applying pre-2020 rates by copying an old invoice.
• Assuming a product bears the general rate without checking whether it has a zero, reduced or increased rate.
• Filing modelo 303 for an activity that reports in modelo 420.

How Frihet handles it

Frihet calculates a preview of modelo 420 from your invoices and expenses and generates the .dec file in the agency’s format, validated against its schema, for you to file on the agency’s portal. It does not file the return for you. If your quarter includes many invoices, check the preview against your books: it does not replace your advisor’s review.