IGIC on Vacation Rentals in the Canary Islands: 2025 Updated Guide for Property Owners

IGIC on Vacation Rentals in the Canary Islands: 2025 Updated Guide for Property Owners 16/04/2025

In this updated 2025 practical guide, we explain everything you need to know about how to declare IGIC if you rent your property to tourists. We'll cover which rentals are subject to IGIC, the tax forms to submit, the REPEP regime for small property owners, and a step-by-step example. We will also share useful tips to avoid penalties.

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What is IGIC and Why Does it Apply to Vacation Rentals in the Canary Islands?

IGIC (Canary Islands General Indirect Tax) is the local equivalent of VAT. It is an indirect tax on the consumption of goods and services in the islands.

The difference is that its tax rates are lower than in the rest of Spain (where the general VAT is 21%), and there are even 0% categories in certain cases.

In the Canary Islands, all tourist rentals are subject to IGIC at a general rate of 7%. Unlike mainland VAT, there is no exemption for short-term rentals, even if no hotel-like services are offered.

Why do vacation rentals pay IGIC? Because by renting your home to tourists, you are engaging in an economic activity (providing accommodation services). In the Canary Islands, this activity is not exempt from IGIC: it is considered a tourist service subject to the tax, even if you don’t offer additional "hotel" services (such as daily cleaning or reception).

In summary, if you legally rent your home to short-stay visitors, you must charge IGIC on the rental price and declare it to the Canary Islands Tax Agency.

Note: IGIC only applies in the Canary Islands. If you are familiar with mainland regulations, keep in mind that there, long-term residential rentals are exempt from VAT, and tourist rentals only pay VAT if hotel-type services are provided. In the Canary Islands, the regulations are different: all short-term tourist rentals carry 7% IGIC by default.

Which Rentals Are Subject to IGIC and Which Are Exempt?

Not all property rentals are subject to IGIC; it depends on the type of lease and the tenant’s intended use:

Long-term residential rentals

If you rent an apartment or house to a tenant as a primary residence (long-term contract for exclusively residential use), it is exempt from IGIC. This type of lease is not considered a taxable business activity.

Seasonal rental (non-tourist)

Seasonal rentals that are not for tourism purposes and are intended to meet a temporary need of the tenant (e.g., for temporary work, studies, home renovations, etc.) may also be exempt from IGIC, provided that no typical tourist services are offered and the rental is not marketed as a vacation rental.

Although there is no explicit minimum duration, these contracts typically last several weeks or months and are formalized under the Urban Leases Law (LAU). The key is that the rental does not have a tourist or vacation nature.

Key criteria for a seasonal rental to be IGIC exempt:

  • The tenant is not a tourist but someone with a specific, non-leisure need.
  • The property is not advertised on tourist platforms like Airbnb or Booking.
  • No services typical of the tourism sector are included, such as periodic cleaning, linen changes, reception, etc.
  • The activity is not carried out systematically or professionally as a tourism business.

Example: If you rent your apartment to a temporary worker for three months, without advertising it on tourist platforms and without additional services, this lease is exempt from IGIC.

Vacation rental (tourist)

If the rental is aimed at tourists, is listed on platforms like Airbnb or Booking, has a vacation purpose, and is carried out repeatedly or professionally, it is subject to IGIC at the general rate of 7%. This applies even if services like daily cleaning or reception are not offered.

Tax Obligations for Property Owners: Registration, Forms to Submit, and Filing Frequency

As a property owner renting out a vacation home in the Canary Islands, you acquire specific tax obligations related to IGIC. Below are the key steps and requirements to comply with the Canary Islands Tax Agency:

Registration in the Business Census of the Canary Islands (Form 400)

The first step is to register for IGIC by notifying the Canary Islands Tax Agency. This is done through Form 400, the official declaration to initiate a business activity.

In this form, you must indicate that you will be operating a property for tourist purposes, selecting activity code 1685: "Non-hotel tourist accommodations" from the official list.

Filing Form 400 is mandatory before you begin renting the property. It registers you as a taxable person for IGIC.

Even if you believe you won’t end up paying IGIC (e.g., because your rental might be exempt or eligible for a special regime), you must still complete this registration. Failing to do so can result in administrative penalties.

Once registration is complete, the Canary Islands Tax Agency (ATC) will assign you a tax ID for the activity, and you can legally operate as a rental host.

Quarterly IGIC Returns (Form 420)

Once registered, if your rental is subject to IGIC, you must file quarterly returns to declare and pay the collected tax.

Form 420 is the quarterly IGIC self-assessment form, where you:

  • Report the IGIC charged to your guests
  • Deduct IGIC paid on related expenses (maintenance, cleaning, etc.)
  • Pay the difference to the tax agency

Filing schedule:

  • April 1 to 20 (1st quarter)
  • July 1 to 20 (2nd quarter)
  • October 1 to 20 (3rd quarter)
  • January 1 to 30 of the following year (4th quarter)

If the IGIC on your expenses exceeds what you charged (e.g., due to large investments), you can carry forward the balance to future quarters. Even if you had no activity, you must file a zero return (unless exempt under a special regime).

Pro tip: Keep organized records of your invoices and expenses with IGIC. You can use the ATC’s electronic platform or accounting software like Quaderno or Debitoor.

Annual Summary Declaration (Form 425)

In addition to quarterly filings, you must submit an annual summary of your IGIC-related activity using Form 425.

What it includes:

  • Total taxable base and IGIC accrued for the year
  • Includes periods with no activity

Deadline: January 1 to 30 of the following year

Joint submission: This form is typically submitted along with the 4th quarter Form 420. The online platform allows both to be filed in one process.

Important: Even if there was no activity during a given quarter, Form 425 is still mandatory if you carried out IGIC-liable activity at any point during the year.

Special Regime: REPEP (Small Entrepreneurs and Professionals)

If your annual income from vacation rentals does not exceed 30,000 euros, you can opt into the REPEP, a simplified tax regime that allows you to operate without charging IGIC.

What REPEP means:

  • You don’t charge IGIC to your guests
  • You are not required to file quarterly Form 420
  • You simplify your accounting and avoid ongoing tax procedures

However, you cannot deduct IGIC on your expenses since you are not charging any IGIC. For many small landlords, this trade-off is worth it due to reduced paperwork.

How to opt-in:

  • Tick the REPEP box when submitting your Form 400 registration
  • You will remain in this regime as long as you stay below the 30,000 euro annual threshold

Important: REPEP is only available to individuals fiscally resident in the Canary Islands. If you are not a resident, you cannot apply.

Form 425 is still mandatory: Even if you don’t file Form 420, you must report your annual income via Form 425, usually with no payment due.

More considerations:

  • If you exceed 30,000 euros in income, you will switch to the general regime the following year and must begin charging IGIC.
  • You can voluntarily leave REPEP if you prefer to use the general regime.

Need help deciding if REPEP is right for you? Pambnb can help you analyze your case and choose the most favorable tax option.

Contact us https://pambnb.com/en/contact for personalized advice.

How IGIC Is Calculated in a Booking

When a guest books for 400 euros, that total already includes the 7% IGIC. To determine the tax amount and your real income, here’s the breakdown:

IGIC (7%) = 400 € x 7 / 107 = 26.17 € Owner's net income (taxable base) = 400 € - 26.17 € = 373.83 €

So, the owner must declare 26.17 euros as IGIC, and the actual income is 373.83 euros.

Important: Platforms like Airbnb or Booking often subtract their commission before transferring payment.

For example: If the guest pays 400 euros and the platform charges 15% (60 euros), the owner receives 340 euros. But IGIC is always calculated based on the full 400 euros, not the amount received in the account.

Additional Services with Different IGIC Rates

If your invoice includes extra services (e.g., garage rental, equipment, transfers), these are separate from the accommodation and may be taxed at different IGIC rates.

For example: A separately rented parking space is taxed at 5%.

Each item should be listed separately on the invoice with its applicable rate.

Practical Comparison: REPEP vs General Regime (with IGIC)

Case 1: Maria under the General Regime

Maria chose not to join REPEP because she expected to earn more than €30,000 annually or preferred to deduct IGIC on her expenses. Therefore, she applies the 7% IGIC to every reservation.

During the year, she invoices a total of €12,000 (IGIC included), which breaks down as:

  • IGIC accrued: €12,000 × 7 / 107 = €785.05
  • Taxable base: €12,000 – €785.05 = €11,214.95

Quarterly filing (Form 420):

  • Quarterly income: ~€3,000
  • IGIC charged: €3,000 × 7 / 107 = €196.26
  • Deductible expenses (1st quarter):
  • Cleaning (15 stays × €50): €750 → IGIC = €49.07
  • Maintenance: €100 → IGIC = €6.54

Total IGIC on expenses: €55.61

Tax to pay: €196.26 – €55.61 = €140.65

So Maria will pay €140.65 in the first quarter and repeat this process each quarter.

This shows how the general regime allows for deductions but requires more administrative effort.

Case 2: Maria under REPEP (IGIC exempt)

Now suppose Maria chose the REPEP special regime because she expected modest earnings (under €30,000).

In this case:

  • She does not apply IGIC to guest invoices.
  • She does not file Form 420 each quarter.
  • She does not pay IGIC on rental income.

However, she cannot deduct IGIC on her expenses (like the €55.61 in the earlier example).

At year-end, she only needs to file Form 425 for information purposes.

Summary:

  • Less administrative burden
  • Less tax oversight
  • No deductions allowed

Best suited for: Individuals residing in the Canary Islands with one or few vacation rentals and modest income.

Which Regime Is Better? Final Comparison and Takeaway

Let’s compare both options:

  • Under REPEP, Maria saves €140.65 × 4 quarters = €562.60 in IGIC payments.
  • She also avoids filing 4 Form 420 declarations. If an advisor charges €40–50 per submission, she saves approx. €160–200 annually in fees.

But be careful: REPEP isn’t always the best choice.

If Maria decides to renovate her property and pays €10,000 to a contractor, the IGIC would be:

  • €10,000 × 7 / 107 = €654.21

If she’s under REPEP, she cannot deduct this €654.21, which might outweigh the benefits.

Practical Conclusion:

  • If you have low income, few bookings, and no major investments planned, REPEP is a simple and effective option.
  • If you're planning renovations, frequent expenses, or exceed €30,000 in income, the general regime may be more beneficial thanks to deductibility.

Evaluate your situation carefully and consult with a tax advisor if needed.

Practical Tips to Stay Compliant with IGIC

  • Register properly from the start: Ensure you have your vacation rental license and submit Form 400 to the Canary Islands Tax Agency.
  • Consider REPEP: If you expect to earn under €30,000, opting in when registering can save you time and effort.
  • Track income and expenses: Issue invoices with IGIC (general regime), or mark them as “IGIC exempt – REPEP” if applicable. Save all expense invoices with IGIC amounts.
  • Use an accountant or software if needed: Tools like Quaderno or Debitoor can simplify your compliance. Hiring a professional is often worth the time saved.
  • Mark deadlines in your calendar: Submit returns by April 20, July 20, October 20, and January 30. Set reminders to avoid penalties.
  • Stay informed: Tax regulations change. Follow official sources and trusted blogs to stay updated on IGIC rates, requirements, and deadlines.

With these habits, managing IGIC on your vacation rental will become easier over time. It may feel overwhelming at first, but with structure (or support), it becomes part of your business routine.

At Pambnb, we handle your IGIC filings and your complete tourism tax compliance.

Discover our full management services -> https://pambnb.com/en/services

Conclusion

IGIC is a fundamental part of vacation rental taxation in the Canary Islands. Now you know what it is, how to declare it, and which regime may best suit your property.

With organized management, the right regime, and professional tools or guidance when needed, you can enjoy the benefits of renting out your vacation home with peace of mind.

You focus on guest experience — we make sure your tax obligations are covered.

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Sources Consulted:

All recommendations are updated to reflect the tax regulations in force in the Canary Islands as of 2025.

We hope this guide has helped you stay up to date with your IGIC obligations as a vacation rental owner!

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