In the Canary Islands, the IGIC on a vehicle rental does not depend on the customer or on how many days the rental lasts: it depends on the vehicle. This is set out in article 59 of Law 4/2012 on administrative and tax measures of the Canary Islands, and it is the first thing a car rental company's invoicing software must get right.
The short answer
| What is rented | IGIC on the rental |
|---|---|
| Petrol or diesel passenger car of any engine power (also quads, caravans and motorhomes) | 15 % |
| Vehicle that can only carry goods (pick-ups do not count), bus, moped | 7 % |
| Hybrid emitting no more than 110 g of CO₂ per kilometre (WLTP cycle) | 7 % |
| Electric vehicle, bicycle | 0 % |
Why is a passenger car rental taxed at 15%?
Because in the Canary Islands the IGIC on a rental follows the IGIC on the sale of the vehicle:
- If the sale of the vehicle is taxed at 9.5% or 15%, its rental is taxed at 15% (art. 59.Seis.1).
- If the sale is taxed at 0%, 3% or 7%, its rental is taxed at 7% (art. 59.Seis.2)…
- …except for electric vehicles, bicycles and gas-powered public transport vehicles, whose rental is taxed at 0% (art. 59.Seis.3).
A petrol or diesel passenger car is sold at 9.5% if it has 11 fiscal horsepower (CV) or less, and at 15% if it has more (art. 59.Cuatro and Cinco). That is why engine power, which matters when buying the car, makes no difference when renting it: both cases end up at 15%. The 11 CV threshold applies to the purchase, not to the rental.
What about renting, i.e. long-term rental?
The article refers to "leasing" (arrendamiento) without distinguishing by duration. The renting of a passenger car is taxed at 15%, just like a weekend rental. What changes the rate is the vehicle, not the contract.
Vans and commercial vehicles
Vehicles that, by their construction, can only carry goods are taxed at 7% (art. 59.Tres.a). Pick-ups are not included here; the law says so expressly. A car-derived vehicle counts as a commercial vehicle only if it has two seats (driver and assistant) and no more, and a cargo area with no side windows that takes up more than half of the interior volume (art. 59.Tres.c).
Hybrids and electric vehicles
A hybrid (combustion engine plus electric motor) emitting no more than 110 g of CO₂ per kilometre is sold at 0%, but rented at 7%: the 0% rate on rentals applies only to purely electric vehicles, bicycles and gas-powered public transport. A hybrid exceeding that 110 g is treated like any passenger car: 15%.
Which hybrids and electric vehicles fall into each category is often adjusted by the Canary Islands budgets. Before loading a specific model into your fleet, confirm it with your tax advisor.
One rate per invoice line
If a passenger car and a van are on the same invoice, each line carries its own rate: the car at 15% and the van at 7%. A single rate for the whole invoice means charging too much or too little, and the modelo 420 requires the figures broken down by rate.
The modelo 420
Every quarter you file the modelo 420, the IGIC self-assessment return, with the taxable amounts and tax payable broken down by rate. If your software invoices by line, the 420 comes from a report; if not, you have to open every invoice of the quarter and add them up by hand.
How car-rent.es applies it
- Each vehicle category, each car and each customer can have its own IGIC rate, and it can be set manually on a specific contract.
- IGIC is applied per invoice line: a passenger car at 15% and a van at 7% fit on the same invoice, each with its own rate.
- The quarterly report separates taxable amounts and tax by rate, showing the tax charged on each invoice: ready for the modelo 420.
- A company in the Canary Islands starts out with the three rental rates already set up: passenger cars at 15%, goods vehicles and hybrids at 7%, and electric vehicles at 0%.
Everything the software does for a rent a car company in the islands is in car-rent.es for rent a car companies in the Canary Islands. And if you want to try it with your own data, create your account: 14 days free.
Summary
- IGIC on rentals depends on the vehicle, not on the customer or the number of days.
- Petrol or diesel passenger car: 15%, whether it's a short-term rental or a long-term lease, and whatever its horsepower.
- Vehicle used only for goods: 7%. Pick-up trucks don't qualify.
- Hybrid emitting up to 110 g of CO₂/km: 7%. Electric: 0%.
- One rate per invoice line, and the 420 broken down by rate.
Source: Ley 4/2012, de 25 de junio, de medidas administrativas y fiscales de Canarias, articles 51 and 59 (consolidated text in the BOE). This article is for information only and does not replace the advice of your tax advisor: IGIC rules change with the Canary Islands budgets, so always check the rate in force on the invoice date.