When considering the expansion of your business into new territories, it is essential to understand the tax peculiarities that may influence the profitability of your operations. The Canary Islands offer a differentiated tax regime that could represent a significant competitive advantage for mainland companies.
Key differences between VAT and IGIC
In mainland Spain and the Balearic Islands, the indirect tax on consumption is the Value Added Tax (VAT). However, in the Canary Islands, the Canary Islands General Indirect Tax (IGIC) is applied, designed to adapt to the economic specificities of the archipelago.
Tax rates:
- VAT: The general rate is 21%, with reduced rates of 10% and super-reduced rates of 4%, applicable according to the nature of the goods or services.
- IGIC: The general rate is 7%, significantly lower than VAT. In addition, there are reduced rates of 3%, applied to specific products and services, and other increased rates for certain operations.
Tax benefits and customs considerations
The application of IGIC instead of VAT may result in a lower tax burden for companies operating in the Canary Islands, potentially improving profit margins and competitiveness in the market.
Customs considerations:
It is important to note that, due to its special tax regime, the Canary Islands are considered an extra-community territory for customs purposes. This implies that import and export operations between the Canary Islands and the mainland are subject to specific customs procedures. For example, goods sent from the mainland to the Canary Islands are considered exports, and those sent from the Canary Islands to the mainland are considered imports. These processes may involve the application of customs duties and require proper document management to ensure regulatory compliance.
Recent updates in VAT regulations
It is essential to stay informed about changes in tax legislation to ensure compliance and optimize tax planning. Recently, significant changes in VAT regulations have been implemented in Spain. For example, Law 7/2024 of December 20 introduced new taxes and modified existing tax rules.
Recent VAT changes in Spain: how do they affect your company?
January 1, 2025 brought important changes in VAT rates, especially after the end of several exceptional measures approved in recent years:
🔺 End of VAT rebate on basic foodstuffs
- Until December 31, 2024, a reduced or even 0% VAT was applied to foods such as bread, milk, eggs, fruits, vegetables and cereals.
- From January 2025, these products will again be taxed at 4%, their usual super-reduced rate.
🧴 Oils and pastes
- Until December 2024: special rate of 7.5%.
- From January 2025: reduced rate of 10%.
⚡ Electric bill
- During the energy crisis, VAT on electricity was reduced to 10%.
- In 2025 it returned to 21%, which increases the cost of energy supply for companies and the self-employed.
These changes have forced companies to:
- Review and update prices.
- Adapt accounting and billing systems.
- Reorganize margins and financial planning.
Being up to date and adapting quickly is essential to maintain profitability and avoid punishable errors. In Advixy we make sure that our clients are always updated and optimize their tax operations in the face of these changes.
How can Advixy assist you?
In Advixy, we are a tax consultancy with presence in all Spain, including the Canary Islands. Our team has a wide experience in different tax areas and is fully qualified to advise you on the particularities of the IGIC and the opportunities offered by the Canary Islands tax regime.
Whether your company is looking for more profitable structures or to expand internationally, we can offer customized solutions that fit your specific needs, ensuring regulatory compliance and optimizing your tax burden.
Trust Advixy to guide you in taking advantage of the tax benefits the Canary Islands has to offer.
