find out what it is and its fiscal importance in the Canary Islands

What is Model 420 and IGIC?

Form 420 is a self-assessment document for IGIC, that is, the Canary Islands General Indirect Tax. In this document, taxpayers from the Canary Islands must register with the Canary Islands Treasury all economic activities that involve the payment of a product or service according to  Law 20/1991 .

Essentially, when a transaction involving the payment of this tax is carried out,  self-employed workers or companies act as intermediaries with the Canary Islands Tax Agency. For this reason, every three months they must declare how much they collected through Form 420 IGIC.

Key differences between IGIC and VAT

Both taxes are applied equally, since both tax the consumption of goods and services. However, since the Canary Islands are so far from the peninsula, some differences have been established for tax management.

While  VAT is applied throughout Spain, IGIC is only used in the Canary Islands. It should also be noted that in this case the tax rate is reduced from 21% to 7% (with some exceptions).

Who is required to file Form 420?

Anyone who carries out economic activities taxed by IGIC must submit this form. This includes companies, self-employed persons and taxpayers registered in the IGIC operations census.

It should be noted that, even if the company is not carrying out its activity, it must submit Form 420 to comply with current regulations.

On the other hand, there are some exemptions to consider:

• New self-employed workers who do not reach €30,000 in annual earnings.
• Transactions between individuals that do not have a commercial objective.
• When the transaction is directly with a company on the peninsula.

How to fill out Form 420 IGIC

We already know what Form 420 is, but how do we fill it out? This process is simple, although you need to do it very carefully to avoid mistakes. Let’s look at the steps to follow:

1. Gather all invoices and deductible expenses that apply according to the quarter to be declared. From each invoice, the  taxable base , the IGIC percentage and the final amount that was collected or paid must be extracted.
2. Obtain Form 420 IGIC. To do this, you must go directly to the  Electronic Office of the Canary Islands Tax Administration and search for the document.
3. Specify the fiscal year and the corresponding quarter. All the data that identifies the company must also be included.
4. Within the Self-Assessment section, the accrued IGIC (that which has been paid by the company’s clients) is entered, followed by the deductible IGIC (the invoices that have been paid to continue the company’s economic activity). There are specific boxes for the different types of transactions.
5. The Income section is completed when the result of Form 420 is positive, that is, when a payment must be made to the Canary Islands Treasury.
6. On the other hand, the Refund section is completed when you make the last declaration of the year and the result is negative. This corresponds to when the Canary Islands Tax Agency is the one who must pay you.
7. Finally, the Compensation box is also filled in when the result is negative, but specifically during the first, second and third trimester.

This entire process must be carried out even if your company does not carry out any singapore email list  economic activity during the quarter. You can read the  instructions of the Canary Islands Tax Agency to obtain more detailed information on these tax forms.

Deadlines and submission of Form 420

As we have already mentioned, the presentation of Form 420 IGIC must be done every how to create a location-based popup three months, that is, it is presented four times a year. Its equivalent is Form 303 of VAT for the peninsula.

In this regard, delivery times will be as follows:

• First quarter: April 1-20.
• Second quarter: July 1-20.
• Third quarter: October 1-20.
• Fourth quarter: January 1-30.

Failure to comply with these deadlines may result in penalties, which depend on factors such as the telemarketing forum amount of taxes, whether there are previous violations, the length of delay, among others. Based on this, you may receive a late filing fee or interest for late filing.

How is Form 420 submitted?

This form can be submitted electronically or in person at a Canary Islands Tax Agency office. The first option is the most common, due to the ease of sending the information. However, if you want to submit the form in physical form, you can  download Form 420 in PDF and complete it.

Deductions and refunds in Form 420 IGIC

Deductions from the Canary Islands General Indirect Tax are only available when you purchase goods or services that are essential for your company’s economic activities. In these transactions you will have to pay the tax, but this can generate refunds.

Therefore, the refund request is made directly when filing Form 420, specifically in the Refund box that we talked about earlier. This section can only be filled out at the end of the fiscal year, that is, in the fourth quarter.

Recent changes in IGIC regulations affecting Form 420

It is important to keep an eye on changes in the IGIC regulations, since the taxable base of various products is often modified there. Below, we will discuss some recent modifications to Law  20/1991 regarding the percentage applicable to these tax models:

• General rate of 7%: This is the most common base, and is now applied to more products, including rubber and plastic articles that were previously subject to reduced rates.
• Reduced rate of 3%: the reduction here extends to new categories such as mattresses and some furniture, as well as veterinary services.
• New reduced IGIC rate of 5%: a new percentage is now established for energy drinks and soft drinks with added sweeteners.
• 0% tax rate: Products exempt from IGIC now include transport services within a single island, veterinary medicines, and certain medical equipment intended to compensate for physical deficiencies in animals.

On the other hand, there is also a change to be highlighted with respect to new organisations. The obligation to register in the business register to benefit from the special regime has been eliminated, which makes management easier for small business owners and professionals.