Guide to customs compliance in the Canary Islands: IGIC, SAD, and special regime

Why the Canary Islands are not “just another province”

The Canary Islands are part of Spain and the European Union, but they operate under their own fiscal and customs regime that fundamentally differentiates them from the rest of the territory. This regime, known as REF (Economic and Fiscal Regime of the Canary Islands), exists to compensate for the archipelago’s insularity, remoteness, and territorial fragmentation.

For any company operating with the Canary Islands, whether shipping goods, providing services, or establishing a presence on the islands, understanding this regime is not optional. Customs compliance errors generate detentions, penalties, and costs that can far exceed the operation’s margin.

IGIC: the VAT that isn’t VAT

The Canary Islands don’t apply VAT. They apply IGIC (Canary Islands General Indirect Tax). It seems like a minor detail, but it has profound implications:

• Different tax rates: The general IGIC rate is 7% (compared to 21% for mainland VAT). There are reduced rates of 3% and 0%, and an increased rate of 15%.
• Invoicing: Invoices to Canary Islands customers don’t carry VAT. They carry IGIC. A frequent error is invoicing with VAT to a Canary Islands customer, which creates deductibility problems and costly corrections.
• Mainland-to-Canary Islands operations: These are considered exports for VAT purposes. The mainland company invoices without VAT (exempt operation) and the Canary Islands importer settles IGIC at customs.

SAD: the declaration you can’t ignore

The SAD (Single Administrative Document) is mandatory for any movement of goods between mainland Spain and the Canary Islands. Yes, even between territories of the same country. For customs purposes, the Canary Islands are considered third territory.

The most common errors in SAD management:

• Incorrect tariff classification: The TARIC code determines duties and the applicable IGIC rate. An error in a single digit can completely change the taxation.
• Incorrectly declared customs value: The value must include transport and insurance up to the point of entry in the Canary Islands. Omitting freight costs is one of the most frequent causes of customs review.
• Incomplete documentation: Commercial invoice, packing list, transport documents, certificates where applicable. A missing document paralyzes clearance.

AIEM: the tax that protects local production

AIEM (Duty on Imports and Deliveries of Goods) is a specific Canary Islands tax that levies certain imports to protect local production. Not all goods are subject to it, but those that are can face rates of up to 15%.

The list of goods subject to AIEM is updated periodically. Verifying whether a product is subject to AIEM before shipping to the Canary Islands is a basic compliance practice that many companies omit until they receive the customs assessment.

Free Zones and special regimes

The Canary Islands have the Gran Canaria Free Zone and the Tenerife Free Zone, which offer significant advantages for warehousing, handling, and distribution operations for goods destined for third countries.

Additionally, the REF includes incentives such as:

• Canary Islands Investment Reserve (RIC): Allows reducing the corporate tax base by up to 90% of undistributed profits allocated to investment.
• Canary Islands Special Zone (ZEC): Reduced 4% corporate tax rate for entities meeting certain employment and investment requirements.
• Import IGIC exemptions: For capital goods and raw materials not available in the archipelago.

Automating compliance: from risk to advantage

Manual customs compliance management in the Canary Islands is unsustainable at scale. Each shipment requires verifying the tariff code, calculating IGIC and import IGIC, checking whether AIEM applies, preparing the SAD, attaching the correct documentation, and ensuring declared values are consistent.

Automation transforms this process:

• AI-assisted tariff classification that suggests the correct code based on the product description
• Automatic tax calculation (IGIC, AIEM) based on tariff code and goods origin
• Automatic SAD generation with pre-validation of all mandatory fields
• Document verification that alerts if any document is missing before shipment

Compliance checklist for Canary Islands operations

1. Verify that invoices to the Canary Islands don’t include VAT
2. Correctly classify the goods (10-digit TARIC code)
3. Check whether the goods are subject to AIEM
4. Prepare the SAD with correct customs value (including freight and insurance)
5. Attach all required documentation before shipment
6. Consider REF incentives if the operation is recurring
7. Maintain a record of all operations for audits

Customs compliance in the Canary Islands is not a burden. It’s an operational discipline that, when well managed, avoids unexpected costs and opens the door to significant tax incentives.