Canary Islands, Ceuta and Melilla: IGIC and IPSI instead of VAT

Terms used

• IGIC — The IGIC is the Canary Islands' general indirect tax, which replaces IVA there.
• IPSI — The IPSI is a local indirect tax in Ceuta and Melilla that replaces IVA.
• IVA — The IVA is Spain's value-added tax (VAT), charged on most goods and services.
• Agencia Tributaria Canaria — The Agencia Tributaria Canaria is the Canary Islands' own tax authority, which handles IGIC.
• Modelo 420 — The modelo 420 is the quarterly IGIC return.
• Modelo 425 — The modelo 425 is the annual IGIC summary return.

Key rules

• No IVA: The Canary Islands, Ceuta and Melilla are outside Spanish IVA, so you use IGIC or IPSI there instead.
• Canary rate: The general IGIC rate is 7%.
• Business invoices: A Canary freelancer invoicing a business on the peninsula normally charges no IGIC, and the client accounts for IVA.
• Ceuta and Melilla: Each city sets its own IPSI rates and forms and collects the tax itself.

Which tax applies where

The Canary Islands use IGIC instead of IVA. Ceuta and Melilla use IPSI instead of IVA. Each has its own rates, forms and tax authority. If you live or work on the peninsula or the Balearic Islands, none of this applies to you, except when you invoice a client in one of these places.

Canary Islands: IGIC

IGIC is run by the Agencia Tributaria Canaria, not the national tax agency. The general rate is 7%. There is also a reduced 3% rate, a zero rate, increased rates of 9.5% and 15%, and 20% on tobacco. A 5% rate applies to some items. Canary law sets these rates and they can change, so check the current figure with the Agencia Tributaria Canaria.

If you are a freelancer in the Canaries, you file IGIC returns every quarter on modelo 420. The annual summary is modelo 425. Large taxpayers file monthly. If you trade with EU businesses, you may also need to declare those operations on modelo 349 or modelo 415.

Invoicing across the border

The Canary Islands count as outside the EU VAT area, so the usual EU rules do not apply. For business clients, the tax follows where the client is based.

• You are in the Canaries and invoice a business on the peninsula or in the EU: you normally issue the invoice without IGIC, and the client accounts for IVA themselves.
• You are on the peninsula and invoice a business in the Canaries: you normally charge no IVA.
• Your client is outside the EU: IGIC generally does not apply.
• Your client is a consumer: special place-of-supply rules apply, so check your type of service.

The decision block below walks through these cases.

Ceuta and Melilla: IPSI

IPSI is a local tax that replaces IVA. Each city runs its own, through its own tax department, not the national tax agency. Rates are generally low, from 0.5% to 10% for services, and vary by activity. Some goods, such as tobacco and fuel, carry higher rates.

You register in the city's census, file self-assessed returns on the city's own forms, and pay the city. Returns are usually quarterly, or monthly for larger businesses. Ask the city's tax office for the exact forms, rates and deadlines for your activity.

What to do first

1. Work out where your business is established and where your clients are.
2. Register with the right authority: the Agencia Tributaria Canaria, or your city's tax office in Ceuta or Melilla.
3. Put the right tax on each invoice, using the decision below.
4. Add the filing dates to your calendar, using the timeline below.

Choosing between options

Which tax do you put on an invoice when the Canary Islands are involved?

• No IGIC, and the client accounts for IVA: You are in the Canary Islands and invoice a business on the peninsula or in the EU. The client self-accounts for IVA through reverse charge.

• No IVA: You are on the peninsula and invoice a business in the Canary Islands, because the place of supply is the Canary Islands.

• No IGIC: You are in the Canary Islands and invoice a client outside the EU.

• Check the place-of-supply rules for your service: You invoice a consumer, or your service has a special place-of-supply rule.

For services between businesses, tax follows where the client is established, and the Canary Islands count as outside the EU VAT area.

Timeline and deadlines

• File the quarterly IGIC return (modelo 420) with the Agencia Tributaria Canaria: from the 1st to the 20th of the month after each quarter

• File the fourth-quarter IGIC return: 1-30 January

• File the annual IGIC summary (modelo 425): by 30 January, with the fourth-quarter return

• Large taxpayers file IGIC returns monthly instead of quarterly: every month

• In Ceuta or Melilla, file IPSI returns on your city's own forms: quarterly, or monthly for larger businesses, on the dates your city's tax office sets

Frequently asked questions

Do I charge IGIC when I invoice a business on the peninsula from the Canary Islands?

Generally no, a Canary freelancer invoices a peninsular or EU business without IGIC, because B2B services are taxed where the client is established. The client accounts for IVA itself through reverse charge. Services to consumers follow specific place-of-supply rules.

Do I charge IVA when I invoice a Canary Islands client from the peninsula?

Generally no, a peninsular freelancer charges no IVA on B2B services to a Canary client, because the place of supply is the Canary Islands. Services to non-EU clients are generally outside IGIC too.

Which tax office do I deal with for IPSI in Ceuta or Melilla?

You deal with the city's own tax office, not the Agencia Tributaria, because each city runs IPSI itself. In Ceuta that is the Consejería de Hacienda, and in Melilla the Consejería de Hacienda's tax management.

What rates does IPSI have compared with IGIC?

IPSI rates are generally low, from 0.5% to 10% for services, depending on the activity. Some goods such as tobacco and fuel pay more. IGIC has a general rate of 7%, so the two systems are not interchangeable.