If you rent a holiday property on Lanzarote, Fuerteventura, Gran Canaria, Tenerife, or any of the other Canary Islands, you operate in a tax jurisdiction that is fundamentally different from mainland Spain. The Canary Islands have their own indirect tax system — and most owners who have not specifically researched this are caught out by it.
Understanding IGIC and the Modelo 400 registration requirement is not optional. It is a legal obligation that applies before you receive your first booking.
What is IGIC?
IGIC — Impuesto General Indirecto Canario — is the Canary Islands' equivalent of mainland Spain's IVA (VAT). The Canary Islands are not part of the EU's VAT area (they are a Special Territory for VAT purposes), which means IVA does not apply in the archipelago. IGIC does.
The practical differences for holiday rental owners:
| Feature | Mainland IVA | Canary Islands IGIC | |---|---|---| | Standard rate | 21% | 7% | | Reduced rate (accommodation) | 10% | 7% | | Territory | Mainland + Balearic Islands | Canary Islands only | | Authority | AEAT (national) | Agencia Tributaria Canaria | | Filing portal | AEAT online | ATC online |
For tourist accommodation in the Canary Islands, the applicable IGIC rate is 7%. This is charged on top of the nightly rental price and must be declared and remitted to the Agencia Tributaria Canaria (ATC) quarterly.
The lower rate is one advantage of operating in the Canaries. The administrative complexity of dealing with a separate tax authority is the trade-off.
What is Modelo 400?
Modelo 400 is the IGIC registration form filed with the Agencia Tributaria Canaria. It registers you as an IGIC taxpayer (obligado tributario) before you begin providing accommodation services subject to IGIC.
You must file Modelo 400 before your first rental. There is no grace period, and there is no minimum income threshold. A single booking from a tourist creates the obligation. Many owners in the Canary Islands have discovered this retroactively — after being audited and assessed for back-owed IGIC on all prior rental income.
What Modelo 400 asks for:
- Your personal or company details (NIE or CIF)
- The nature of the economic activity (tourist accommodation)
- The commencement date of the activity
- The relevant epígrafe (activity category code) — for holiday rentals, this is typically epígrafe 685 (Tourist Apartments) or equivalent
Filing Modelo 400 is a one-time registration. Once submitted and confirmed, you are registered as an IGIC taxpayer for that activity. You then file quarterly returns for as long as you continue operating.
Quarterly IGIC returns: Modelo 420
After registering via Modelo 400, you declare and remit IGIC quarterly using Modelo 420. The return covers the IGIC you have charged guests (IGIC repercutido) minus any IGIC you have paid on business expenses related to the rental (IGIC soportado deducible).
The quarterly filing deadlines are:
| Quarter | Period covered | Filing deadline | |---|---|---| | Q1 | January – March | 20 April | | Q2 | April – June | 20 July | | Q3 | July – September | 20 October | | Q4 | October – December | 30 January (following year) |
Important: if you made no rental income in a quarter, you must still file a nil return (declaración sin actividad). Failure to file — even for a nil quarter — results in automatic surcharges from the ATC.
What counts as a deductible expense?
You can reduce your net IGIC liability by deducting IGIC paid on certain expenses that are directly related to the rental activity. To be deductible, the expense must:
- Be exclusively related to the rental activity (not personal use)
- Be supported by a proper IGIC invoice (factura) issued in your name
- Be recorded in your accounting records
Typical deductible items for Canary Islands rental owners:
- Maintenance and repair work by local tradespeople (with IGIC invoices)
- Cleaning services invoiced with IGIC
- Property management fees charged with IGIC
- Specialist equipment purchased for the property
You cannot deduct IGIC on purchases that are not exclusively related to the rental activity — for example, you cannot deduct the IGIC on a car unless the car is used exclusively for the rental business. Keep all invoices for at least four years; the ATC can audit back that far.
Common mistakes Canary Islands rental owners make
Registering late. The most common and costly mistake is failing to file Modelo 400 before the first rental. The ATC can assess back-owed IGIC for all undeclared rental income, plus interest and penalties. Some owners have faced assessments covering three or four years of undeclared income.
Confusing IGIC with IVA. Owners who have accountants based on the mainland — or who have switched from mainland properties — sometimes file with the AEAT instead of the ATC, or use the wrong forms entirely. Ensure your tax adviser has specific experience with Canary Islands IGIC.
Not filing nil returns. If your property was vacant or if you had no bookings in a quarter, you still need to file Modelo 420 showing zero income and zero IGIC. Many owners skip this step and accumulate penalties without realising it.
Charging IGIC on top of the total price. IGIC is calculated on the base price (excluding IGIC). If your nightly rate is €100, the IGIC base is €100 and the IGIC is €7, giving a guest-facing price of €107. Some owners mistakenly charge 7% on a price that already includes IGIC — this results in overcharging guests and complicates the return.
Ignoring IGIC on platform bookings. When renting through Airbnb or Booking.com, the platform collects the guest payment. You are still responsible for declaring and remitting IGIC to the ATC on that rental income. Neither platform remits IGIC on your behalf in Spain.
IGIC and the NRA requirement
IGIC is separate from the Número de Registro de Alquiler (NRA), which has been mandatory for all Spanish holiday rentals since January 2025. However, both must be in place before you take bookings:
- The NRA confirms your property is legally registered as tourist accommodation
- IGIC registration confirms you are compliant with Canary Islands tax law
Operating without either exposes you to different sets of penalties from different authorities. It is not uncommon for an inspection to cover both simultaneously.
How Villa Check In helps with Modelo 400 and IGIC
Villa Check In handles the full Modelo 400 registration process for Canary Islands property owners. Our service covers:
- Collecting the information required for your IGIC registration
- Filing Modelo 400 with the Agencia Tributaria Canaria on your behalf
- Providing you with your IGIC registration confirmation
- Advising on record-keeping requirements for deductible expenses
For ongoing quarterly compliance, we can connect you with tax advisers experienced in Canary Islands IGIC. We also handle the SES Hospedajes guest registration that applies across all of Spain, including the Canary Islands.
If you want to understand the full compliance picture for your Canary Islands property — IGIC, NRA, VV Licence, and SES Hospedajes — see our services and pricing here.