With the intention of boosting economic activity in the Canary Islands, this territory is currently exempt from cancelling VAT, however, they have their own tax rate known as IGIC. However, they have their own tax rate known as IGIC. Do you want to know what it means? In this article we will tell you more about it.
What is IGIC?
The Canary Islands General Indirect Tax, known by its acronym IGIC, is a tax levied on commercial operations of goods and services, as well as imports carried out in the Spanish Autonomous Community of the Canary Islands.
This tax was created by law 20/1991 in the month of June and it was for the month of January 1993 that it finally came into force.
Nowadays, the IGIC is the equivalent or substitute of the VAT, since it fulfills the same function. However, there are certain differences between the two taxes, do you have any idea what they are? Continue below to find out!
Difference between IGIC and VAT
As we have just mentioned, both VAT and IGIC are levied on the various transactions carried out during the tax year. But then, what makes them different? Basically, the main difference is the associated % to be paid.
While in the Canary Islands the general associated percentage is 7%, in the rest of Spain it corresponds to 21%.
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IGIC tax rates
At present, the law establishes that there are 6 tax rates in the Canary Islands: general, reduced and increased rates:
Zero rate (0%)
Applicable to medicines, water, books, newspapers, magazines, as well as to works on subsidized housing and passenger air transport.
Reduced rate (3%)
Applicable to products derived from the mining, chemical, textile, wood, land transportation, electric power distribution and car repair industries.
General rate (7%)
Applicable to those products and services that are not included in the rest of the tax rates.
Increased rate (9.5%)
Applicable to imports of cars, jet skis and boats. In addition, certain services for the execution of movable works are included.
Special increased rate (15%)
Applicable to alcoholic beverages, articles of jewelry, perfumery, glass, crystal, earthenware, ceramic or porcelain products, cars with a power exceeding 11CV (except cabs and similar).
Special rate (20%)
Applicable to the delivery of tobacco
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Who must declare the IGIC?
The Canary Islands General Indirect Tax must be declared before the corresponding Tax Agency, by all those businessmen and/or self-employed people who buy a good or a service in the territory. If they wish, they can carry out the procedure through the electronic office.
In this way, SMEs and self-employed workers under the direct estimation regime must file form 420.
On the other hand, the annual IGIC form is form 425 and the informative declarations form 415.
Activities exempt from IGIC
This tax came into force in 1991, and the current regulations establish that no tax is levied on non-business operations, i.e. private individuals, or those carried out without an onerous purpose.
Here is a list of the main activities exempt from IGIC that you should know:
Social welfare services
Services provided by sports entities
Insurance and financial operations
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In addition, self-employed persons may be exempted from this tax regime if they do not exceed 30,000 euros of annual turnover. However, it will not be applicable in the case of communities of goods.
Doing business in the Canary Islands is quite attractive for entrepreneurs and the main reason is precisely due to the IGIC. And it is that, undoubtedly, it means an advantage by allowing a lower tax rate in comparison with the rest of Spain.
If you want to know more about tax returns and tax issues, be sure to visit our website! You will find articles that will help you to carry out the procedure correctly, and you will be able to contact our tax experts.