Value Added Tax in Spain

Overview

The Spanish value added tax – VAT (Impuesto sobre el valor añadido – IVA) system is similar to that established in other countries of the EU.

Value Added Tax (VAT) (Impuesto sobre el valor añadido – IVA) is an indirect and general consumption tax assessed on the value added to goods and services. It is borne ultimately by the final consumer and is charged as a percentage of the price. Every consumer in Spain must pay it.

This tax is applicable to commercial activities in Spain involving the production and distribution of goods, as well as the provision of services. Some specific cases are exempt from VAT tax application.

It is suggested that all technical and legal matters pertaining to taxes be referred to a Spanish Lawyer for advice, guidance and execution.

Is the VAT tax applicable in the whole Spanish territory?

The VAT (IVA) is not applicable in the Canary islands, Ceuta and Melilla, wherea different local tax (the IGIC) is applicable.

Charging VAT. Taxable operations

Only businesses and individuals working as self-employed persons can legally charge VAT on their taxable operations. All businesses, except those that carry out exempt activities, are subject to VAT. All of them must enter the amounts charged in the Spanish Treasury (Hacienda).

VAT taxable operations include the supply of goods, the provision of services and imports.

Businesses can deduct from their VAT liability the amount of tax they have paid to other taxable persons on purchases for their business activities.

Imposition of VAT on imports and exports operations

Goods and services are subject to VAT tax when these are supplied in Spain. This normally occurs either if the goods are located in Spain at the moment of sale, or if the services’ provider has its place of business in Spain, with certain exceptions.

The imposition of VAT on imports between Member States has ceased. The EU exporter shall quote the recipient’s VAT number on the sales invoice.

As regards trade with third countries:

  • The goods or services supplied from an E.U. member state to a non EU can be zero-rated for VAT purposes as long as the exporter can show evidence to prove that the goods have actually been exported.
  • Non-EU companies that export goods and services to the EU are taxed at import and VAT will have to be paid on the goods or services.

Goods and services exempt from tax application in Spain

The following operations are exempt from VAT application:

  • Medical services.
  • Education.
  • Cultural and sportive associations.
  • Financial and insurance transactions.
  • Renting rural or urban properties (except the rental of business premises)

VAT rates applicable in Spain

Since July 2010, Spain applies a standard rate of VAT of 18% for most goods and services.

A reduced rate of 8% is applicable for certain goods and services, e.g. if you buy a newly built property from a developer, travelers transport services, etc.

A super-reduced rate of 4% is applicable for goods and services considered as basic necessities; e.g. bread, eggs, cheese (essential food), newspapers and magazines, etc.

VAT refunds

Non-European individuals may apply to Spain for a refund of the VAT they have paid on purchases made while visiting Spain that they send or take home.

If this is your case, be aware that you should inquire about VAT refund procedures at the time of purchase. Refund procedures may differ from one case to another, but chances are that forms will need to be filled out when the goods are bought.

You should show your passport or identification papers for refund. The retailer will sign the form and return the VAT refund document. Your goods must be exported from the EU within 3 months after purchase, then you will be entitled to your VAT refund in the way you agreed with the retailer.

Not all shops operate the scheme for refunds, before buying goods you need to check that the retailer operates the Scheme, they do not have to do so, they will usually advertise if they do.

You cannot get refund of VAT on meals or services such as hotel accommodation, taxi fares etc. Furthermore, there are some taxable goods for which the Scheme is not applicable, as consumable items (e.g. perfume) etc.

VAT refunds are also important as regards European business expenses. It is necessary doing the paperwork and deal with the Spanish tax authorities to claim the refund.

Getting legal help

Our lawyers provide solid legal advice regarding any VAT-related question in Spain:

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