IGIC Exemption for small traders -Régimen Especial del Pequeño Empresario o Profesional en el IGIC

2018 has begun with good news for the self-employed and small entrepreneurs,  the modification of certain aspects of the IGIC, LAW 7/2017, of December 27, of General Budgets of the Autonomous Community of the Canary Islands means an exemption for most self-employed who bill less than 30,000 euros per year.

The amendment to the law establishes a special regime for small business owners or professionals, which will include individual taxpayers whose total volume of operations* carried out during the previous calendar year**, in the totality of their business or professional activities, did not exceed 30,000 euros. Another requirement to be able to be included is to be registered on the business or professional census (model 400).

Taxpayers who, as of January 1, 2018, are have the right to be included in the special regime of the small business owner or professional, must notify the Canarian Tax Agency up to April 2 2018 of the inclusion or renouncement of the aforementioned special regime. The communication will be made through the census declaration of modification (model 400).

Likewise, it will be understood that  you do not want to be included (tacit waiver) if you present in 2018 the first self-assessment of the IGIC model 420, however, you must analyze your choice well, since the waiver of this regime will take effect for a minimum period of three years . Once this period has elapsed, it shall be understood to be extended for each of the following years in which this special regime could be applicable, except for revocation of the resignation.

This new regime will be incompatible with the special regime of retail merchants (minoristas), without prejudice to its application to the provision of services or other deliveries of goods made outside the commercial activity; also with the special regimes for “criterio de caja” and agriculture, livestock and fisheries.

The taxpayers under this new special regime for small business owner or professional, will not have to present quarterly returns but will have an obligation to present an occasional declaration (annual) in the cases foreseen in article 58.1 Decree 268/2011, of August 4, or in any other legal or regulatory norm; declare and, if applicable, pay the tax debt accrued in the importation of goods; submit a census declaration (model 400) in the terms and conditions established by regulation, communicating to the Canarian Tax Agency the inclusion, resignation or exclusion of this regime;

Invoices issued must contain the expression “Exención franquicia fiscal“; you must keep books as required by Decree 268/2011, of August 4, or any other legal or regulatory standard; present the required informative declarations to passive subjects of IGIC and present, in the form and requirements that are established by regulation, an informative declaration on the volume of operations.

One of the issues that you should take into account in deciding whether to accept this special scheme or not is that you may have heavy monthly expenses/supplies that involve paying IGIC yourself, for example, payment to other service providers who charge IGIC. Being subject to this new regime means these IGIC quotas would no longer be able to be deducted as they would if they were incurred in the general regime, nor of course ,could they be included as part of expenses deducted when calculating income tax owed as you have to use the figure before IGIC is charged when including an expense.

In addition to this new regime, some types of indirect tax (IGIC) are also modified, such as in the case of telephone bills or for the acquisition of first habitual dwellings for people under 35 years of age, from 7% to 3%. a significant reduction.  Improvement works  in habitual dwellings are reduced to  3% and the exemption of IGIC is established on certain personal hygiene products.

Legislation: http://www.gobiernodecanarias.org/hacienda/dgplani/presupuestos/2017/ley/


* amount invoiced refers to the total invoices for the year BEFORE IGIC and including any invoices which were exempt of IGIC for any reason

** In the event that a taxpayer started  their business during the 2017 tax year the amount invoiced will be calculated by extrapolating the amount they did invoice  and multiplying it for the whole year.

Newly self-employed people who start up in in 2018 can opt to be included in the Régimen Especial del Pequeño Empresario o Profesional en el IGIC in the 2018 financial year (if they wish) and then in 2019, depending on the volume of invoicing in 2018 they will know whether or not they meet the requirements to continue applying the exemption.