A debate has emerged among restaurant owners, consumers, and legal experts in the Canary Islands regarding whether the Canary Islands General Indirect Tax (IGIC) should be included in menu prices or if it can be added afterwards.
With the tourism industry playing a significant role in the region’s economy, transparency in pricing is essential for maintaining the trust of both locals and visitors. But is it legal for restaurants to exclude IGIC from the displayed prices and add it later?
The Canary Islands benefit from a special tax regime, distinct from Spain’s mainland IVA. The IGIC, set at 7%, is a local sales tax applied to goods and services, including those offered in restaurants and bars. Unlike Spain’s IVA (21%), which often appears separately on receipts, IGIC is expected to be handled with more transparency, especially in the hospitality sector.
Under Spanish consumer law, it is illegal to mislead consumers regarding prices, and all taxes must be clearly stated. According to Decree 23/2019, which regulates commercial activity in the Canary Islands, all prices in the hospitality sector must be "final prices," meaning they must include any applicable taxes, such as IGIC.
The aim of this regulation is to protect consumers from unexpected costs and ensure clear pricing. Therefore, restaurants are required by law to include IGIC in the prices displayed on menus. Failing to do so, or adding the tax afterwards, could be considered a breach of consumer rights and lead to fines.
Clients have every right to complain to consumer associations and report the establishment if they are presented with a bill that has IGIC added on to the prices displayed on menus.
Despite the legal obligation, some bar and restaurant owners argue that separating IGIC on the bill provides greater transparency and allows customers to better understand the tax component of their meal costs. They claim that this practice aligns with common practices in other regions of Spain, where IVA is shown separately.
However, legal experts point out that while separating IVA is customary on the mainland, IGIC is subject to different rules. The law in the Canary Islands explicitly states that the final price displayed should be the price the consumer pays, inclusive of taxes.
For consumers, particularly tourists, unexpected price increases due to taxes being added to the bill are a source of frustration. Visitors, accustomed to paying the price they see on the menu, often feel caught off guard when presented with a bill that has additional charges.
A local consumer advocacy group recently raised concerns over the practice, stating that it not only confuses customers but also damages the reputation of the Canary Islands as a transparent and tourist-friendly destination.
Restaurants that violate the rule by not including IGIC in menu prices risk fines from consumer protection authorities. Depending on the severity of the infraction, these penalties could range from small administrative fines (600 to 6,000€) to more significant financial penalties (6,000 to 60,000€), especially if the practice is widespread or repeated.
In the Canary Islands, it is illegal for restaurants to add IGIC to menu prices after the fact. The law requires that all taxes, including the 7% IGIC, must be included in the prices displayed on menus. This rule not only ensures compliance with local regulations but also promotes transparency and protects consumers from unexpected charges.
As this debate continues, it’s clear that businesses need to align with the legal framework to avoid penalties and maintain trust with both locals and the millions of tourists who visit the islands each year.
