The Canary Islands have preemptively reduced the IGIC (Canarian Indirect General Tax) on olive oil to 0%, ahead of the Spanish government’s formal adoption of a similar measure for VAT, scheduled for next Tuesday. This adjustment places olive oil in the category of essential goods that benefit from a super-reduced tax rate in Spain, following its VAT reduction from 10% to 5% in 2023.
The Spanish Ministry of Finance has decided to permanently classify olive oil as a basic necessity, aligning it with other staple items like bread, eggs, and fruit. This tax policy change will take effect starting July 1st. Meanwhile, the Canary Islands have already implemented this reduced rate, showcasing their initiative in financial policy adjustments.
In the Canary Islands, the IGIC serves as the equivalent to VAT on the mainland. Adjustments to the IGIC rates have occurred periodically, including a notable decrease from 7% to 6.5% with the onset of the 2019 regional budgets, which took effect on January 1st of that year. However, the rate was subsequently restored to 7% in 2020, with proposals still pending to reduce it further to 5% due to various economic circumstances. The special increased rate was also adjusted from 13.5% to 15%.
Specifically, the 3% drop to 0% IGIC rate has been applied to a range of products including specialty breads, olive oil, and various types of pasta such as spaghetti, macaroni, and couscous, excluding those that are pre-cooked or prepared.
Moreover, Decree law 4/2024 of April 1st has extended the zero IGIC rate until September 30, 2024, initially set in 2021. This extension aims to support the recovery of economic activities in La Palma, mitigating the aftermath of the volcanic eruption and the impacts of the COVID-19 pandemic. Meanwhile, the price of olive oil saw a decrease of 2.1% in May compared to April, marking its first price reduction since January 2023.
