IGIC on renovations: when does the reduced rate apply?

In the Canary Islands renovations are taxed under IGIC (Canary Islands General Indirect Tax), not VAT. The general rate is 7%, but qualifying primary-dwelling renovation works may benefit from a reduced 0% or 3% rate, which can mean a significant saving. Several requirements must be met, and the invoicing company applies the rate under the Canary Islands rules.

IGIC at a glance

• General rate - 7%: the default on renovation works, and the rate that applies to second homes and holiday lets.
• Reduced rate - 0% or 3%: may apply to qualifying renovation of a primary dwelling where the conditions are met.

Requirements for the reduced rate

• The home must be the client's primary dwelling and meet the programme conditions.
• The client must be a private individual or a residents' association using the property as housing.
• The cost of materials supplied by the company must stay within the limits set for the works to count as a renovation rather than a supply of goods.

Why the materials limit matters

The reduced rate is designed for renovation - that is, mainly labour-led work - rather than for what is really the sale of goods. If the materials the company supplies exceed the permitted share of the total, the job is treated as a supply of goods and taxed at the general rate. This is why an itemised quote matters: it makes the labour-to-materials split clear and shows which rate applies to which part of the work.

Worked example

In a EUR 20,000 renovation of a qualifying primary dwelling, the reduced IGIC rate may apply to the labour-led works, while general purchases of goods are taxed at the standard 7%. The saving compared with paying 7% on the whole amount can be meaningful, but it depends entirely on the type of dwelling and the labour-to-materials split. We confirm the exact treatment for your project before you commit.

New enclosures like these can qualify for the reduced IGIC rate in a primary home.

Primary residence versus holiday let

The distinction that catches most foreign owners out is the primary-residence test. A second home or a property let as a holiday let (Vivienda Vacacional) is not a primary dwelling, so the reduced rate generally does not apply and the works are taxed at the general 7%. If you are weighing this up as part of a purchase, see our guide to buying and renovating a property in Gran Canaria.

IGIC and grants

The reduced IGIC rate is separate from public grants, and the two can often apply to the same primary-residence retrofit. On energy works in particular, you may benefit from both at once - see our guide to grants and subsidies for retrofits in 2026.

Energy-efficient glazing fitted during a Gran Canaria renovation.

At Ecoinnova we verify your case and show the correct IGIC in the quote, always as a separate line. You can also see our energy retrofit service and related grants.