REPEP – Special Canary Islands Regime for Small Business Owners or Professionals
The biggest tax benefit for the self-employed in the Canary Islands: invoices without IGIC (Canary Islands General Indirect Tax), forget about quarterly returns, and simplify all your administrative tasks. Available only in the Canary Islands.
What is REPEP?
The Canary Islands archipelago is not just beaches, good weather, and gastronomy; it can also be a great economic incentive for those wishing to start a business. The Canary Islands’ tax system differs from that of mainland Spain and the Balearic Islands. In the Canary Islands, there is no Value Added Tax (VAT), but rather the Canary Islands General Indirect Tax (IGIC), among other differences.
The scheme that probably offers the most tax benefits is the Special Regime for Small Business Owners or Professionals (REPEP) . This regime is not available in the rest of Spain or in the Netherlands, the only exceptions within the European Union.
This is a special tax regime that helps self-employed individuals starting their business in the Canary Islands by reducing the tax burden of the local tax rate. In practical terms: if you are self-employed, reside in the Canary Islands, and invoice less than €50,000 per year, you can avoid charging IGIC (Canary Islands General Indirect Tax) to your clients, file quarterly tax returns, and do not need to maintain IGIC records.
Who can qualify for the Canary Islands Special Regime for Small Businesses?
To qualify for the REPEP, you must request it at the time of registration through Form 400 (Census declaration of commencement, modification or cessation).
The REPEP includes, unless expressly waived, natural persons who are residents and carry out their activity in the Canary Islands and whose total volume of operations carried out during the previous calendar year does not exceed €50,000 (excluding IGIC).
If this amount is exceeded, Form 400 must be submitted again, indicating the obligation to pay taxes under the General Regime. The deadline is January 31st of the year following the year in which the amount was exceeded.
| Condition | Eligibility |
|---|---|
| Self-employed individual residing in the Canary Islands | ✔ Yes |
| Annual turnover less than €50,000 (excluding IGIC) | ✔ Yes, it's an essential requirement |
| Registration in the census using Modelo 400 | ✔ Mandatory |
| Companies (SL, SA, cooperatives, joint ownership communities…) | ✘ Excluded |
| Self-employed individuals who exceed €50,000 during the fiscal year | ✘ Excluded |
| Activities exempt from IGIC by nature (healthcare, education…) | ✘ Excluded |
| Anyone who has not fulfilled the obligation to inform the ATC using a census form | ✘ Excluded |
Who is excluded from the REPEP?
- Self-employed individuals whose total volume of operations exceeds €50,000 during the financial year.
- Self-employed individuals who exclusively deliver goods or provide services exempt from tax (retail merchants).
- Anyone who has not complied with the obligation to inform the Canary Islands Tax Agency of an economic activity using a census form, or the development of the same at a residence.
Are you unsure whether you meet the REPEP requirements?
At Asesorae, we review it. We tell you if you can qualify, how to do it, and if it’s really better for you than the general system.
What obligations are there when joining the REPEP?
The REPEP greatly simplifies management, but it doesn’t eliminate all obligations. Here’s what you still need to comply with:
Census registration — Modelo 400 (before starting)
Submit your inclusion, waiver, or exclusion to the Canary Islands Tax Agency by means of a census declaration (Form 400). This is the first mandatory step, even if you have been operating for some time.
Issue invoices with a clear message
Issue invoices including the phrase "Tax exemption" or "Transaction exempt from IGIC due to tax exemption." Without this mention, the invoice does not comply with the legal requirements of the REPEP.
Modelo 425 — Annual Information Return (January)
Submit the Annual IGIC Information Return (Modelo 425) once a year. It is mandatory even if you haven't invoiced anything. It doesn't imply payment to the Tax Agency, but failure to submit it on time will result in penalties.
Keep an eye on the €50,000 limit
Ensure that annual turnover does not exceed €50,000. If it does, submit a new Form 400 before January 31 of the following year to notify the change to the general tax regime.
IRPF doesn't disappear
The REPEP only affects the IGIC. Income continues to be taxed under Personal Income Tax (IRPF) as income from economic activities, without prejudice to the possibility of applying the numerous regional tax deductions available on the income tax return for residents of the Canary Islands.
What are the benefits of REPEP?
Those who opt for the REPEP do not have to charge IGIC on their sales or services, nor pay this tax quarterly, resulting in significant savings. Furthermore, they are not required to file the quarterly tax return (Modelo 420).
It should be noted that income tax and other taxes must also be paid, without prejudice to being able to apply the numerous regional deductions for residents of the archipelago.
In conclusion, the REPEP is a very advantageous tax regime for those with a medium-low income level, due to the savings it provides, as well as the simplification of tax obligations it entails.
No quarterly IGIC income
You don't pay the 7% IGIC tax to the tax authorities each quarter. That money stays in your account.
More competitive prices
Your invoices are 7% cheaper than those of a self-employed worker under the standard scheme. A direct advantage over the competition.
No quarterly Modelo 420
You only need to submit the annual summary, Modelo 425, in January. Much less bureaucracy and administrative burden.
No IGIC record books
You are not required to keep IGIC ledgers. Total administrative simplification.
REPEP vs. IGIC General Regime: Key Differences
With REPEP
- You don't charge IGIC to your customers
- You don't file Modelo 420 every quarter
- You don't have to keep IGIC record books
- You only need to submit the annual Modelo 425
- More competitive prices
- Less administrative burden
Without REPEP (General Regime)
- You charge your customers 7% IGIC
- You submit Modelo 420 every quarter
- You have to keep IGIC record books
- You can deduct the IGIC from your expenses
- Greater administrative complexity
- It might be convenient if you have a lot of expenses
Who is exempt from paying IGIC?
It is important to distinguish between the REPEP exemption (based on turnover) and the objective IGIC exemptions based on the type of activity. Activities that are exempt from IGIC by their very nature do not need the REPEP, but neither can they qualify for it.
Healthcare
Retail trade
Education
Cultural businesses
Blood deliveries
Insurance and reinsurance operations
Financial operations
Social assistance services
Postal services
Services provided by sports entities
Cómo solicitar el REPEP paso a paso
Pedir el REPEP es muy sencillo, solo tienes que hacer lo siguiente:
El Modelo 400: Tu puerta de entrada al régimen
Para darte de alta, debes presentar el Modelo 400 ante la Agencia Tributaria Canaria. En este documento marcarás la casilla correspondiente para solicitar tu inclusión en el régimen especial.
Plazos para solicitar el alta o la renuncia
Normalmente, el alta se realiza al inicio de la actividad o durante el mes de enero si ya eras autónomo y quieres cambiarte de régimen porque tus ingresos han bajado.
¿Qué ocurre si superas el límite de ingresos durante el año?
Si a mitad de año tus ingresos superan los 50.000 euros, quedarás excluido del régimen y tendrás que empezar a facturar con IGIC a partir del año siguiente (o según la normativa específica de ese momento).
Is the REPEP or the General Regime better for you?
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Frequently Asked Questions about REPEP
What is REPEP?
It is a special IGIC tax regime for small businesses and professionals in the Canary Islands. It allows self-employed individuals with annual revenue of less than €50,000 to operate without charging IGIC to their clients and without filing quarterly tax returns. It is exclusive to the Canary Islands archipelago within Spain.
Who can benefit from the REPEP?
Self-employed individuals or professionals with tax domicile and activity in the Canary Islands, with annual income below €50,000. Companies (SL, SA, cooperatives…) cannot be included in the REPEP under any circumstances.
What are the advantages of REPEP?
Those registered under the REPEP scheme are exempt from charging IGIC on their invoices and from filing quarterly self-assessments (Modelo 420). This represents a direct saving of time and money, as well as simplifying the entire IGIC tax management process.
Am I required to issue invoices with IGIC if I am registered in the REPEP?
No. Invoices are issued without IGIC and must include the statement “Tax exemption” or “Transaction exempt from IGIC due to tax exemption” (regulated in Article 10.1.28 of Law 20/1991). Omitting this statement is a formal non-compliance that may result in penalties.
Can I deduct the IGIC I have paid if I am registered in the REPEP?
No. Since you don’t charge IGIC to your customers, you also can’t deduct the IGIC you pay on your purchases and expenses. This is the main drawback of the system. If you have high expenses subject to IGIC, the general system might be more advantageous in the long run.
Is it compatible with being self-employed?
Yes, the REPEP applies specifically to self-employed individuals (natural persons) provided they meet the residency requirements in the Canary Islands and do not exceed the annual turnover limit of €50,000.
How do I apply for inclusion in the REPEP?
Registration is done by submitting a census declaration using Modelo 400 to the Canary Islands Tax Agency. This can be requested at the time of registration or, if you are already registered, by submitting a census modification. Inclusion is automatic if you meet the requirements, unless you expressly opt out.
Can I opt out of the REPEP?
Yes, you can resign at the start of your business activity or during the month of December of the year prior to the year in which the resignation takes effect. Important: voluntary resignation is valid for a minimum of 3 years , during which time you will not be able to reapply for the REPEP registration even if you meet the requirements.
What happens if I exceed €50,000 in income?
The special tax regime will no longer apply, and you will be subject to the general IGIC regime starting January 1st of the following year . You have until January 31st of that year to submit the required Modelo 400 for modification. If your turnover falls below €50,000 in a subsequent year, you can reapply for inclusion in the REPEP.
Does the REPEP also exempt me from income tax?
No. The REPEP only affects the IGIC. Income continues to be taxed under Personal Income Tax (IRPF) as usual. However, in the Canary Islands, there are specific regional tax deductions available on your tax return that can significantly reduce your tax liability.
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