# VAT vs IGIC: key tax rules for companies operating in the Canary Islands and the Spanish mainland

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**Last modified:** 2026-08-31T21:50:14Z

### Is VAT charged in the Canary Islands?

No. The Canary Islands are part of Spain and the European Union but lie outside the EU VAT territory. Supplies of goods and services located in the islands are generally subject to IGIC. Transactions with mainland Spain, the Balearic Islands, the EU or third countries require a separate review of place of supply, transaction type, invoicing and customs formalities.

Updated 31 July 2026. Editorial responsibility: Advixy S.L. Reviewed against primary guidance from the Canary Islands Tax Agency, the Spanish Tax Agency and the Spanish Official Gazette.

The VAT–IGIC answer does not depend only on the supplier’s address. The place of supply, whether the customer acts as a business or consumer, the physical movement of goods and special service rules all matter.

### VAT and IGIC: a quick comparison

The [Spanish Tax Agency](https://sede.agenciatributaria.gob.es/Sede/ayuda/manuales-videos-folletos/manuales-practicos/manual-iva-2025/capitulo-02-introduccion/territorio-que-se-aplica-impuesto.html)  defines the VAT territory and the [Canary Islands Tax Agency](https://www3.gobiernodecanarias.org/tributos/atc/w/igic-impuesto-general-indirecto-canario-)  explains IGIC. Rates are only one part of the decision: place and evidence determine the correct tax treatment.

| Issue | VAT | IGIC |
| --- | --- | --- |
| General territory | Mainland Spain and the Balearic Islands. | The Canary Islands. |
| Standard rate | 21%, with reduced rates and exemptions depending on the transaction. | 7%, with zero, reduced and increased rates and exemptions depending on the transaction. |
| Authority | Spanish Tax Agency (AEAT). | Canary Islands Tax Agency (ATC). |
| Goods between territories | Entry into the VAT territory may be an import subject to import VAT. | Entry into the islands may be an import subject to IGIC and customs formalities. |
| Deduction | Depends on entitlement, business use, a valid invoice and VAT requirements. | Depends on entitlement, business use, a valid invoice and IGIC requirements. |

### Goods between the Canary Islands and mainland Spain

Physical movement crosses two indirect-tax territories. The commercial invoice, transport evidence and customs declaration must therefore describe the same transaction.

#### Mainland Spain or Balearics → Canary Islands

Where the conditions for dispatch outside the VAT territory are met, the supplier may document the sale without charging VAT; entry into the islands is treated as an import and may trigger IGIC. Confirm the importer, customs value, ancillary costs and proof of exit.

#### Canary Islands → mainland Spain or Balearics

The dispatch may be exempt from IGIC as an export if properly evidenced; entry into the VAT territory may trigger import VAT. Incoterm, carrier, consignee and customs document must be consistent.

#### Transactions within the Canary Islands

Supplies located in the islands are reviewed under IGIC. The applicable rate is not always 7%: it depends on the goods, activity and current exemptions or specific rates.

### Services: business or consumer and place-of-supply rules

For B2B services, the general rule often locates the supply where the business customer is established; for B2C, it often starts from the supplier’s establishment. Special rules apply to land, events, transport, catering, telecoms, electronic services and other cases. The [Spanish Tax Agency](https://sede.agenciatributaria.gob.es/Sede/iva/iva-operaciones-comercio-exterior/prestaciones-servicios.html)  summarises cross-border service rules, but each invoice must be checked against the VAT rules and [Law 20/1991 on IGIC](https://www.boe.es/buscar/act.php?id=BOE-A-1991-14463).

### Invoices, customs, returns and deductions

#### Invoice

Identify supplier and customer, description, date, territory and rule applied, including the appropriate exemption or reverse-charge wording where relevant.

#### Customs

For goods, retain the declaration, transport record, value, Incoterm and proof of exit or entry. An invoice without the customs file may not be enough.

#### Returns

Common IGIC forms include 420 and 425; common VAT forms include 303 and 390 where applicable. Regime, frequency and information duties can change the required form.

#### Deduction

Paying the tax is not sufficient: business use, transactions carrying deduction rights, a valid invoice, records and a timely claim are required.

### Checklist before issuing the invoice

- Goods or services?
- Where are the goods delivered or the service located?
- Is the customer acting as a business or consumer?
- Is there transport between the islands and another territory?
- Who is the importer or exporter, and which Incoterm applies?
- Which evidence, ledger and return does the regime require?

### Primary sources and limits of this guide

- [ATC · General IGIC information](https://www3.gobiernodecanarias.org/tributos/atc/w/igic-impuesto-general-indirecto-canario-)
- [ATC · Current IGIC rates](https://www3.gobiernodecanarias.org/tributos/atc/documents/65729/215145/Tipos_IGIC_para_DIGIC.pdf/e72842de-1e89-fb1d-4140-44da092e988f?t=1738677246064)
- [AEAT · Spanish VAT territory](https://sede.agenciatributaria.gob.es/Sede/ayuda/manuales-videos-folletos/manuales-practicos/manual-iva-2025/capitulo-02-introduccion/territorio-que-se-aplica-impuesto.html)
- [AEAT · Cross-border services](https://sede.agenciatributaria.gob.es/Sede/iva/iva-operaciones-comercio-exterior/prestaciones-servicios.html)
- [BOE · Law 20/1991 on IGIC](https://www.boe.es/buscar/act.php?id=BOE-A-1991-14463)

General guidance only. It does not replace a review of the transaction, contract, customer status, territory, transport evidence or rules in force at the tax point.

### IRPF withholdings follow a separate filing flow

VAT and IGIC do not replace a company’s withholding duties. If it pays payroll or professional invoices subject to withholding, review [**Spanish Form 111, its filing frequency and deadlines**](https://advixy.com/en/form-111-spain-who-must-file-deadlines/)  separately.

If you trade between the Canary Islands and mainland Spain, Advixy can review the full invoicing, customs, ledger and filing flow before an error repeats.

[**Request a review →**](https://advixy.com/en/tax-consultancy-in-tenerife-and-the-canary-islands/)