IGIC Zero Rate La Palma Extended: Which Operations Are Exempt in 2025

Key data

Companies and self-employed workers operating in La Palma's reconstruction can continue to benefit from the zero IGIC rate thanks to Decree-law 7/2025, of December 23. The regulation extends a tax measure that eliminates indirect tax burden on acquisitions of goods and services linked to the recovery of the area affected by the volcanic eruption.

The decree entered into force on December 23, 2025 and was published in the BOE on May 11, 2026. Its objective is to maintain the tax advantage that already existed for those affected and for those working in reconstruction, preventing IGIC from increasing the cost of materials, services and equipment necessary for recovery.

What does this regulation establish?

Decree-law 7/2025 extends the period of application of the zero IGIC rate for certain operations related to the volcanic eruption in La Palma. In practice, this means that certain purchases of goods and services linked to reconstruction do not carry IGIC on the invoice.

IGIC is the Canary Islands equivalent of mainland VAT. Applying zero rate means that the tax exists formally but is applied at 0%, so the buyer does not pay any amount for this concept. This is different from an exemption: the supplier can continue deducting IGIC borne on their own purchases.

The regulation does not create a new regime: it extends and broadens the period of a tax measure that was already in force previously to address reconstruction needs resulting from the volcano. To apply it correctly, it is essential to verify in the decree text which specific operations are covered.

Economic and operational impact

The main economic effect is the improvement in liquidity for those affected and for companies working in reconstruction. By not bearing IGIC on their acquisitions, buyers have more cash available to allocate to recovery instead of immobilizing it in tax payments that would later need to be recovered via refund.

For suppliers, the impact is operational: they must correctly identify which operations are covered by the decree and apply the zero rate on their invoices. An invoice issued with the general IGIC rate when it should carry zero rate can generate problems for both the supplier and the buyer in a potential inspection or review.

The main risk is not direct economic, but subsequent tax adjustment: if the rate is applied incorrectly, the Canary Islands tax authority can demand correction, with the administrative and financial costs that entails.

Who does it affect?

• Individuals affected by the volcanic eruption in La Palma who acquire goods or services for the reconstruction of their homes or properties.
• Construction and rehabilitation companies operating in the affected area of La Palma and invoicing or receiving invoices for reconstruction work.
• Self-employed workers providing services linked to the recovery of the volcanic zone (masonry, installations, supplies, etc.).
• Material and equipment suppliers that supply products intended for reconstruction in La Palma and must apply zero rate on their invoices.
• Tax advisors and management firms that manage invoicing for affected clients or operating in the area, as they must review the correct application of the rate in each operation.

Practical example

A construction materials company based in Santa Cruz de La Palma supplies cement, beams and roofing materials to an individual affected who is reconstructing their home destroyed by the volcano.

Without the extension of the zero rate, that invoice would carry IGIC at the general Canary Islands rate, increasing the total cost for the buyer. With Decree-law 7/2025 in force, the supplier issues the invoice with zero IGIC rate, so the individual does not pay any amount for this tax.

The supplier, for its part, must ensure that this operation is actually covered by the decree before applying the zero rate. If they apply it without the operation meeting the requirements, they may face a subsequent adjustment. If they do not apply it when they should, the buyer will have paid an IGIC that did not correspond to them.

What should companies do now?

1. Verify which operations are covered by Decree-law 7/2025: not all operations related to La Palma automatically have zero rate. Review the official text to identify eligible operations.
2. Update invoicing systems: ensure that invoicing software allows applying zero IGIC rate and that the administrative team knows when to use it.
3. Train the administration and sales team: whoever issues invoices must know which operations carry zero rate and which do not, to avoid errors that generate adjustments.
4. Review invoices already issued since December 23, 2025: if invoices have been issued with the general rate when zero rate should apply, consider issuing corrective invoices.
5. Document the link of each operation with reconstruction: in case of a possible inspection, it is advisable to have evidence that each operation invoiced with zero rate is actually related to the recovery of the affected area.

Official source

Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. The information provided is based on the text of Decree-law 7/2025 and current regulations as of the publication date. Tax regulations are subject to change and interpretation may vary depending on specific circumstances. We recommend consulting with a qualified tax advisor or legal professional before making decisions based on this information. The author and publisher assume no responsibility for errors, omissions or consequences arising from the use of this information.