Is Shopping in the Canary Islands Tax-Free?

If you’ve ever visited the Canary Islands, you might have heard someone claim that shopping here is “tax-free.” But is that really true, or is it just a myth that’s passed around between travellers? The answer is a little more nuanced, so let’s dive into the details to clear things up!

Understanding the Canary Islands’ Tax System

First off, the Canary Islands aren’t completely tax-free. What confuses many people is the fact that the Canary Islands have a different tax system from mainland Spain and the rest of the EU. Instead of VAT (Value Added Tax), which applies across most of the European Union, the Canary Islands have their own special tax, known as IGIC (Impuesto General Indirecto Canario).

IGIC is essentially the Canary Islands’ version of VAT, but the rates are much lower. The standard VAT rate in mainland Spain is 21%, while the standard IGIC rate in the Canary Islands is only 7%. So, while shopping here isn’t entirely tax-free, it can feel a lot cheaper compared to mainland Europe thanks to these lower tax rates.

Tax Rates Breakdown:

• Mainland Spain VAT (IVA): 21%
• Canary Islands IGIC: 7% (standard)

There are also reduced rates of IGIC, such as 3% for essential goods and 0% for some specific items like basic food products, which further contributes to the perception of lower prices.

The Myth of “Tax-Free”

Now, let’s talk about the myth of tax-free shopping. The term “tax-free” is often thrown around when people talk about duty-free shops at airports, but that’s a whole different concept. In a true duty-free zone, you can buy items without paying any local taxes (and potentially avoid import duties when returning home). This does happen in the Canary Islands if you’re a tourist buying from a duty-free shop at the airport, but in regular shops on the islands, you’ll still be paying IGIC.

The confusion likely comes from the low IGIC rates making things feel much cheaper than other parts of Europe, but again, it’s not tax-free — you’re just paying a lower tax.

Do You Pay Tax When Leaving the Canary Islands?

If you’re a resident of the Canary Islands or buying goods here to take back to mainland Spain or elsewhere, there are a few things to keep in mind.

Because the Canary Islands are outside of the EU’s VAT zone, when you leave the islands and take purchases to mainland Spain or other EU countries, customs rules may come into play. For example, if you’re carrying goods above a certain value limit, customs authorities might ask you to declare those items and pay VAT or other duties. The duty-free allowances usually cover items for personal use, but large or high-value goods might need to be declared.

Also, if you’re ordering something online from the Canary Islands to be shipped to mainland Spain, you might face customs duties, as shipping between the two regions is treated like shipping outside of the EU’s VAT area.

What About Tourists?

For tourists, this lower tax rate can mean a more affordable shopping experience compared to mainland Europe. Many travellers take advantage of buying electronics, fashion items, and perfumes in the Canary Islands because they find them at a lower price due to the reduced IGIC.

For example, perfumes and cosmetics tend to be popular items for tourists to purchase, especially since these products can be significantly more expensive in mainland Europe due to VAT.

Why is Alcohol So Cheap in the Canary Islands?

If you’ve ever noticed how inexpensive alcohol is in the Canary Islands, it’s because alcohol is subject to much lower taxes here compared to mainland Spain and much of Europe. The Canary Islands government imposes a reduced rate of tax on alcohol, which is why you’ll often find spirits, wine, and beer at a fraction of the price you might pay elsewhere. Whether you’re buying a bottle of local rum or international brands, it’s a great place to stock up.

The Canary Islands as a “Tax Haven”?

You may have also heard that the Canary Islands are sometimes referred to as a “tax haven.” This doesn’t mean that everything is tax-free, but there are favourable conditions for businesses and certain types of imports and exports. For example, the islands have a special tax regime that encourages investment and economic development. Companies in certain industries can benefit from lower corporate tax rates or exemptions. But for the average shopper, these benefits don’t directly apply to everyday purchases like clothing, electronics, or groceries.

So, Is Shopping in the Canary Islands Tax-Free?

In short: No, it’s not completely tax-free. But thanks to the Canary Islands’ unique tax status and the lower IGIC rates, shopping here can feel significantly cheaper than in mainland Spain or other European countries.

For tourists and locals alike, the reduced tax rates make it an attractive place to shop, especially for big-ticket items or luxury goods. Just remember, if you’re taking items back to mainland Spain or elsewhere, be aware of customs and potential VAT charges if you exceed your personal allowance.

Quick Summary:

• The Canary Islands are not tax-free, but they have a much lower tax rate than the mainland.
• IGIC (Impuesto General Indirecto Canario) is the tax applied in the Canary Islands, with a standard rate of 7%, compared to Spain’s 21% VAT.
• Shopping here can feel cheaper, especially for tourists, thanks to the lower tax rates.
• Always keep in mind customs rules if you’re taking high-value goods back to mainland Spain or elsewhere in Europe.

If you’ve had experiences with shopping in the Canary Islands, feel free to drop a comment below! Have you ever run into customs issues or found some great deals thanks to the lower taxes? We’d love to hear about it!