Canary Islands SII Reflects Digital Taxation’s Complexity

Which of the following statements are true?

• The Canary Islands are a Spanish territory.
• The Canary Islands are not part of Spain’s tax regime.
• The Canary Islands were not named after birds.

All of them, it turns out. However, tax professionals within global companies ought to focus on that second statement given that the Canary Islands’ new digital tax reporting requirement takes effect Jan. 1, 2019.

As more global tax authorities embrace digital taxation rules to expedite revenue-collection and ease their own administrative workloads, tax functions are contending with more complexity in complying with a growing number of new requirements.

Although the Canary Islands are part of Spain, the territory operates independently from a taxation perspective, via a special regime. Rather than levying a value added tax (VAT), like Spain, the Canary Islands levies a General Indirect Tax of the Canaries (IGIC). This year, the territory instituted the new rule requiring companies that exceed an annual revenue threshold (of slightly more than €6 million annually in the Canary Islands) to electronically file IGIC on a near real-time basis.

This may sound familiar. Spain instituted a similar requirement, Suministro Inmediato de Información (SII), last year (here’s a closer look  at the rule). And, yes, the Canary Islands also refer to their new requirements as “SII,” which translates to “immediate information supply.” But, again, keep in mind that A) the Canary Islands SII applies to IGIC; and B) the territory was named for dogs (canaria in Latin) as opposed to birds. Such are the intricacies of the global move toward digital taxation.