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In brief

The Canary Islands Government has decided to reduce the tax rate applicable to different goods and services including medical devices, veterinary medicines and veterinary services. These changes are expected to facilitate patients’ access to these products and services by reducing their costs.

In more detail

New developments

The Government of the Autonomous Community of the Canary Islands has reduced the amount of the Canary Islands General Indirect Tax (“Impuesto General Indirecto Canario”, in Spanish; and hereafter “IGIC”) on many goods and products by means of the new Law 7/2023 on the General Budget of the Autonomous Community of the Canary Islands for 2024 (hereafter “Law”).

Among the different rate reductions, and following the provisions allowed by the one of last amendments of Council Directive 2006/112/EC on the common system of value added tax, the IGIC tax reductions are foreseen for healthcare, which mean that goods such as medical equipment, devices and other types of instruments designed to treat physical, mental and sensory impairments will be taxed at a zero rate. The Law also provides for this tax rate to be applied to veterinary medicinal products and equipment intended exclusively to compensate for the animals’ physical deficiencies. Finally, it should also be noted that the taxation of veterinary services is reduced from 7% to 3%.

Healthcare Considerations

From our viewpoint, this measure will have an important impact on the healthcare sector, allowing for improved access to this technology for patients and hospitals. In addition, it is expected to save millions of dollars in terms of health services in the Canary Islands public health system. In this regard, it would not be surprising if, in the future, the Spanish Government decides to follow the example of the Canary Islands by reducing the Value Added Tax (“Impuesto sobre el Valor Añadido”, in Spanish) on medical devices and veterinary medicines.

Tax considerations

Council Directive 2024/542, which amends Council Directive 2006/112/EC, authorizes Member States to apply reduced rates, below the 5 % minimum, to some goods, including medical and hygiene goods.

In this sense, The Government of the Autonomous Community of the Canary Islands has a special economic and fiscal regime, regulated by Law 22/2009 of 18 December, which grants a series of special powers. Among them, the determination of its annual financial resources through the approval of annual budgets and the granting of regulatory powers over its own indirect taxes, such as the IGIC.

For the time being, this measure has only been implemented in the Canary Islands, as the Spanish General State Budgets have yet to be approved at national level, which could introduce the same changes to the general VAT regime, reducing the rate for medical devices and veterinary medicines.

The Canary Islands and the Spanish General Directorate of Taxes will play a key role on disseminating which products will be impacted by this indirect tax rate reduction. These entities have issued in the past and will keep issuing binding resolutions to taxpayers that may request confirmation, on a case-by-case analysis, on whether a certain product is included within the “medical device” or “veterinary medicine” category as per the purpose of the applicable indirect tax Law.

It needs to be analyzed whether and to what extent the benefits of this measure, which will result in a reduction of costs for the companies that market the impacted products, will eventually be passed on to final consumers in order to see how effective this measure will be. Having a quick look on recent VAT rates reductions, in 2023 the Spanish Government introduced a reduction of the VAT rate applicable to some foods (pasta and vegetable oils) was reduced from 10% to 5%, and that of other basic foods from 4% to 0%. From the first analysis, data suggests that the pass-through of the reduction to prices has been almost completed in the short term.

We hope this reduction on the IGIC rate is also implemented for VAT as, for sure, it will have a positive impact on the industry. Companies marketing medical devices and veterinary medicines in Spain will need to double-check the tax rates applied to products that may be impacted by this regulation and keep abreast of further resolutions delimiting or expanding the application of the reduced tax rate, as well as its potential implementation for VAT purposes.


For more information or in case you need individual advice for your company, please contact our team of experts.


Montserrat has extensive experience in pharmaceutical and health law, as well as in compliance, contract law, licensing, competition law and acquisitions in the pharmaceutical sector. She is the coordinator of the healthcare practice in the Barcelona office.
She assists healthcare companies throughout the life cycle of healthcare products (drugs, IVD and medical devices, combination products, cosmetics and food supplements), from R&D to commercialization and more specifically in the areas of clinical trials (agreements, regulatory procedures, processing of personal data), market access (pricing and reimbursement), products and companies regulations (MA/CE-marking, vigilances, required licenses, product classification, labelling), commercial relations between healthcare industries (distribution, (co)promotion, manufacturing, supply, licensing, partnership agreements), relations with healthcare professionals and/or patients including compliance (anti-gift and transparency laws); communication and advertising, e-health (connected devices, telemedicine, hosting of health data) and product liability. Her practice encompasses both advisory and litigation matters.
She also has considerable experience in the drafting of codes of professional ethics and conducting compliance audits, and advising on advertising and promotion of medicines and medical devices, including via the internet, online advertising and social media. Montserrat advises on a wide range of agreements related to the pharmaceutical industry, such as license and distribution agreements, clinical trial agreements, and supply and manufacturing agreements.


Javier Blázquez is a Partner in Baker McKenzie, Barcelona office.


Albert Arenas is an Associate in Baker McKenzie, Barcelona office.


Damià Triay is an Associate in Baker McKenzie, Barcelona office.


Raquel Suárez is an Associate in Baker McKenzie, Barcelona office

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