Tax exemption for Canary Islands with the new Shopify Taxes Setup

Accounting & Taxes

Topic summary

Main issue: Stores in Spain need to exempt VAT (IVA) for Canary Islands, Ceuta, and Melilla (outside EU VAT area) and apply correct local taxes (e.g., 7% IGIC within the Canaries), but Shopify treats these as Spanish provinces with 21% VAT and standard Spain shipping.

Impact:

  • Incorrect tax at checkout and quarterly accounting complications.
  • Shipping rate calculators fail because couriers treat Canary Islands as a separate country (code “IC”), while Shopify treats them as Spain.

Workarounds shared:

  • Manual/draft orders with 0% tax and legal notes; some simply avoid shipping there.
  • Mark customers as “not collecting tax” (billing-based; breaks if they ship to mainland Spain; doesn’t help first order).
  • ZIP-based scripts (35, 38, 51, 52) to refund/remove VAT—warning: risk double adjustments.
  • One user claims success using an older Shopify tax setup allowing region-level rules (prices without IGIC, add IGIC only for Canaries).

Shopify status/timeline:

  • 12 Nov 2021: Zero VAT reportedly implemented for Ceuta and Melilla; Santa Cruz de Tenerife and Las Palmas pending; no timeline.
  • 2024–2025: Still a known limitation; regions locked since EU treated “as one”; support suggests feature requests/Plus.

Requested fix: Split Canary Islands into a separate country (IC) and remove those provinces from Spain to fix tax and shipping.

Resolution: None; issue remains open.

Summarized with AI on December 11. AI used: gpt-5.
13

Attention to all admins using scripts for reducing VAT for Spanish regions:

Shopify is starting to implement zero VAT for these regions. As of 12 NOV 2021, out of four, two are VAT compliant.

This means that unsupervised scripts giving 21% back for ZIP codes starting with 35, 38, 51, 52 need to be fixed until all regions are done.

As there isn’t a clear timeframe when all the regions will be compliant, having both Shopify’s fix and a script will generate double price reductions.

Regions implemented: Melilla and Ceuta.

Pending: Santa Cruz de Tenerife and Las Palmas.

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