Canary Islands have a special treatment regarding VAT because they are seen as islands far from Europe, so it has been decided that in this region VAT will not be applied. Instead the local tax is called IGIC (Impuesto General Indirecto Canario) and deals with the following products:
- 0% on water, sanitary products, newspapers, some basic foods, air and sea transport between islands.
- 3% for chemical, mineral, textile, wood, paper and transport industries plus vehicle reparations.
- 7% for general goods, this is the main bracket for most products.
- 9,5% vehicles
- 15% on special cigars, alcohol, jewels, leather products and perfumes.
- 20% for black tobacco
- 35% for red tobacco
So most of the times you will deal with a 7% IGIC on goods which is quite good compared to 22-24% that you find in Europe but remember that any good that gets imported to the islands will have to go through Customs. Because of IGIC, Europe decided to put Customs to protect local producers. This also means that if you fly back to the EU, the import rules for tobacco/alcohol/etc are different than when you would fly from mainland Spain. For customs, you are coming from outside of the EU, when flying from the Canary Islands.
If you are a Canarian company or autonomo and sell between the islands to normal customers you will generally have to apply the IGIC, if you sell also to Europe IGIC will be removed from the total and the European government where the goods are sent will apply its own VAT rate.
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