IGIC Vacation Rental Canary Islands 2026: How to Declare, Forms 420 & 425

The IGIC for vacation rentals in the Canary Islands in 2026 is one of the most important tax aspects that any property owner renting to tourists should understand.

It is not just about knowing whether it must be paid, but about understanding when IGIC applies, how a vacation rental is taxed, which forms need to be filed, and how to calculate the tax correctly.

In this complete guide, you will find everything you need to comply with your tax obligations for vacation rentals in the Canary Islands, optimize your profitability, and avoid mistakes in your tax filings.

What is IGIC and why it applies to vacation rentals

The IGIC (Canary Islands General Indirect Tax) is the indirect tax specific to the Canary Islands, equivalent to VAT in mainland Spain.

In 2026, the general rate remains:

7% applied to tourist accommodation services

When you rent a property as a vacation rental, the authorities consider that you are carrying out:

An economic activity providing accommodation services

This means:

• It is not a traditional rental

• It is not treated as a primary residence

• It is subject to specific tourism and tax regulations

That is why IGIC is mandatory in most vacation rental cases in the Canary Islands.

When do you pay IGIC in vacation rentals

The key factor is not the length of the stay, but its touristic purpose.

Cases where IGIC applies

In these cases, the 7% IGIC is applied to the accommodation service.

Cases where IGIC does NOT apply

In these situations, it is considered a civil rental, not a tourist activity.

General regime vs REPEP in vacation rentals: which one to choose

When a vacation rental is subject to IGIC in the Canary Islands, the owner must understand a key difference: not all taxpayers are treated the same. In practice, the two main options are the general IGIC regime and the REPEP (Small Business Special Regime).

The choice between the general regime and REPEP directly affects:

• How you issue invoices

• Whether you charge IGIC to guests

• Whether you can deduct expenses

• Which tax forms you must file

What is the general IGIC regime

The general IGIC regime is the standard taxation system. Under this regime, the vacation rental owner is considered a business operator for tax purposes.

This means they must:

Under this regime, the owner collects IGIC within the accommodation price and then declares it to the Canary Islands Tax Agency using Form 420. In addition, they can deduct IGIC paid on expenses related to the activity, such as cleaning, maintenance, utilities, renovations, furniture, platform commissions, or professional services, as long as they are properly documented.

The general regime is usually more suitable when the property generates significant income, there are deductible expenses, or renovations and investments are planned.

What is REPEP

REPEP stands for the Small Business Special Regime (Régimen Especial del Pequeño Empresario o Profesional). The Canary Islands Tax Agency defines it as a special IGIC regime that provides a tax exemption threshold for self-employed individuals established in the Canary Islands, provided they do not exceed the turnover limits established by law.

In 2026, the Canary Islands Tax Agency (ATC) indicates on its Form 400 page that certain individuals with an annual turnover not exceeding €50,000 may fall under this regime. This includes those engaged exclusively in property rental activity and individuals who qualify for REPEP.

In practice, being under REPEP means:

The ATC states that transactions carried out in the Canary Islands by taxpayers under REPEP are generally exempt from IGIC. It also specifies that invoices must be issued without IGIC and include the wording:

“Exempt under the small business tax regime (REPEP)”

REPEP does not mean the activity does not exist or that there are no tax obligations. It means that, if requirements are met, IGIC is not charged to the guest due to the exemption threshold.

Key differences between the general regime and REPEP

How to choose the right regime

The decision should not be based only on “paying less tax,” but on how the vacation rental activity is structured.

REPEP may be suitable if:

• You are an individual resident or established in the Canary Islands

• You have one property or a small activity

• Your turnover is below the legal threshold

• You have limited deductible expenses

• You prefer simple tax management

• You want to avoid quarterly IGIC filings (if not required otherwise)

The general regime may be suitable if:

• You own multiple vacation rental properties

• You exceed or expect to exceed REPEP limits

• You plan renovations or investments

• You have significant business expenses

• You want to deduct IGIC on costs

• You operate the rental as a growing business

Practical rule

If you have low income and few expenses, REPEP can simplify management.
If you have higher income, multiple properties, or significant costs, the general regime usually offers better tax optimization.

Practical example: which regime may suit you

Step-by-step: how to declare vacation rental taxes in the Canary Islands

This is the full process any property owner must follow:

Step 1: Register with Form 400

Form 400 is the mandatory first step to register as a business or professional in the Canary Islands and declare the start of your vacation rental activity, as well as choose your tax regime (general or REPEP).

It must be submitted before starting to rent the property.

Form 400 is also used to report changes or to cease activity.

Download Form 400

Step 2: Issue invoices

If you operate a vacation rental, you are carrying out an economic activity, so you must issue an invoice for each stay.

An invoice must include:

• Invoice number

• Issue date

• Owner details (name, tax ID, address)

• Client details (name; tax ID if applicable)

• Description of the service, property address and stay dates

• Total booking price (paid by the guest)

• Taxable base (amount excluding IGIC)

• IGIC rate (typically 7%)

• IGIC amount

If you are under REPEP, IGIC is not included. The invoice must state:

“Exempt under the Small Business Special Regime (REPEP)”

Step 3: Record income and expenses

In the Canary Islands, you can deduct IGIC on expenses directly related to your activity.

To be deductible, a cost must:

• Be related to the vacation rental activity

• Have a valid full invoice (not a simple receipt)

• Include IGIC breakdown

• Be issued in the owner’s name

• Be properly recorded in your accounts

Examples of deductible expenses:

Platform commissions, cleaning, utilities, maintenance, furniture, renovations, professional services

Step 4: File Form 420

Form 420 is the quarterly IGIC tax return, where you declare:

• IGIC charged to guests (output tax)

• IGIC paid on expenses (input tax)

Example calculation

Income:

• Total bookings: €3,000

• IGIC included: €196.26

Expenses:

• Cleaning + utilities

• IGIC paid: €80

Result:

• IGIC charged: €196.26

• IGIC paid: €80

👉 Tax to pay:
196.26 – 80 = €116.26

Download Form 420

Step 5: File Form 425

Form 425 is the annual IGIC summary return. Unlike Form 420, it does not involve paying tax, but reporting the total yearly activity.

Submission date: January of the following year

It allows the Tax Agency to:

• Verify your activity

• Check consistency with quarterly filings

• Detect errors or discrepancies

Download Form 425

Final note

The IGIC for vacation rentals in the Canary Islands is not just a tax formality — it is part of the daily management of any tourist property.

If not handled properly, it can directly impact your profitability and lead to administrative issues.

Need help managing your vacation rental?

At Pambnb, we specialize in managing vacation rentals in the Canary Islands.

We handle daily operations and offer additional support for administrative and tax-related processes.

Contact us and find out how we can help you manage your property efficiently.