The Deputy Ministry of Finance and Relations with the European Union of the Government of the Canary Islands in Las Palmas has issued a binding resolution clarifying the application of the Canary Islands General Indirect Tax rates to artisanal bakeries and pastry shops. The ruling interprets the consolidated text of the Economic and Fiscal Regime approved by Legislative Decree 1/2025, precisely differentiating the tax treatment of bread and pastries made by the establishment itself, depending on their intended use and the buyer's status.
The case under analysis concerns a company that produces ordinary bread, specialty bread, and pastries for immediate consumption without requiring further processing, selling them in a premises where consumption on the premises is prohibited, and distributing them to both individuals and hospitality businesses. Under this model, the technical dispute centered on determining whether the products should be considered prepared food excluded from the super-reduced VAT rate and, if so, what exact tax rate should be levied on each transaction carried out within the archipelago.
Regarding ordinary and specialty bread, the resolution establishes that its delivery is invariably taxed at a zero rate, as stipulated in Article 33 of the consolidated text of the REF (Special Economic Regime). This tax benefit applies regardless of whether the product is considered prepared food, the legal nature of the purchaser, or its intended commercial use after leaving the bakery.
Regarding sweets prepared and delivered to end consumers for consumption off the premises, the tax authorities have determined that they meet all the legal requirements for prepared food made by the taxpayer in the Canary Islands without requiring further processing. Since this category excludes the super-reduced rate when the purchaser is the end consumer, the sale of pastries to private individuals is subject to the standard IGIC rate of 7 percent.
Conversely, if the finished sweets are destined for other businesses acting as such, such as restaurants or cafes that sell or serve them on their premises, the transaction is not considered direct final consumption. In this specific case between professionals, the product is treated as general food and is subject to the super-reduced VAT rate of 3 percent stipulated in the regional regulations, thus resolving the tax implications for Canary Island bakeries.
