VAT in Spain
Value Added Tax or VAT is the consumption tax a country sets on a product according to the value added at each stage of its supply chain from production to final sale.
What is VAT called in Spain?
VAT in Spain is called IVA, impuesto sobre el valor añadido. It is applied to goods or services in Spain. The standard vat rate is 21% but certain goods and services are eligible for the reduced rate of 10%, 4% or 0%.
For business to be compliant, the Spanish authorities have detailed IVA rules to control, record and process the transactions carried out in Spain. These rules cover how to handle requirements of invoices acquired in Spain, reporting and exchanging foreign currency, how to correct any errors found on past transaction returns, the requirements for credit notes and corrections and the types of records to be maintained for all accounting done by the business office.
When did Spain start VAT?
IVA was introduced in 1986 across Spain, the same year it became a member of the European Union. Like all eu member states, Spain was required to incorporate the EU VAT directives as stated in the EU member guidelines into Spanish VAT laws. The Agencia Estatal de Administración Tributaria oversees all VAT affairs, concerns and governance in Spain.
VAT in Spain is applied to any businesses that sell goods or services that may be taxable under Spanish law. A business is required to acquire a Spanish VAT registration and businesses in Spain are also required to submit periodic returns with all the information regarding their taxable products. This information generally covers the sales and costs incurred by the business doing that quarter. These returns are due on the 20th day of the month that follows the reporting period.
Do I have to pay Spanish VAT?
Spain, like many countries around the world, implements a VAT on its products. Unlike most eu member states, Spain implements a slightly different version of VAT.
In Spain imported goods are taxed at the point of import or at the point of exchange which is considered transfer of title.
The vat return contains information about the VAT due and services are taxed when the service is performed or as enjoyed.
Spanish VAT rates still broadly follow the rules by the EU which means spanish vat rates are set at a standard vat rate above 15% as specified by the EU and followed by businesses offering taxable services.
The current VAT in Spain is set at a rate of 21%. This is applied to all goods and services that are taxable.
The 10% reduced rate is applied to a number of essential social areas such as certain foods, water bills, select medical and pharmaceutical equipment and products, all domestic transport services and any inland international transport taken by road or rail, agricultural supplies, social housing and covers certain repairs and renovation, hotel accommodation, waste collection, select social services, select soft drinks, bars, cafes and nightclubs, alcoholic beverages, admission to amateur sporting and cultural events, water treatment and waste management.
The 4% reduced tax rate is applied to select foods, medical and pharmaceutical products, newspapers and periodicals, social housing and services, domestic care services and constructions.
The 0% reduced tax rate is applied to gold coins, ingots and bars and internal and international air or sea travel.
What services are exempt from VAT in Spain
The 0% reduced tax rate is applied to items of great value. If you bring gold coins, ingots and bars to Spain or deal in providing services that make these available to others your business is eligible for a 0% tax or is tax exempt from VAT in Spain.
Internal travel, which means travel through the country by air or sea is also exempt from VAT in Spain. International air or sea travel is seen as an economic growth factor because a lot of businesses use air and sea to import and export goods that are made available to improve the lives of the citizens, which help improve the standard of living. This is seen as a positive contributor to economic growth and is also exempt from VAT in Spain to encourage more people to participate and make it easier for businesses to accomplish their goals.
Can I claim VAT back in Spain?
Individuals who are not residents of the EU can claim vat refunds on any purchases made in Spain and taken back to their country of residence.
In order to access vat return, vat rules in Spain state that you need to find and fill out the Tax-Free forms available in the stores where you made your purchases. Once you fill out the form, you must have it validated within 3 months of making the purchase at the Customs Office.
You can also claim your vat refunds via the electronic VAT refund procedure or DIVA. The digital process makes the validation easier and much quicker. You can ask for the DIVA form from the shops where you make your purchases and validate it at the automatic terminals that are found at the airports and main ports in Spain.
In order to have a stress free process, you should have your passport, your receipts or DIVA form for all the purchases you want to claim, the actual goods you purchased and your boarding pass. Once your form is validated by Customs or the electronic service, you’ll have two ways to reclaim your VAT. You can use the Tax Free management access point, which is located at your location of departure. You’ll have your refund issued immediately in Euros by cheque, bank transfer, to your credit card or in cash. There will be a service fee charged for this process.
You can claim your refund at the shop where you made the purchases. The entire amount for the refund will be issued within 15 days by cheque, bank transfer, credit card.
An important point to remember is that you can only claim a refund when leaving the EU. This means that your refund is only issued at your last departure point in the EU, otherwise you’ll have to wait if you are leaving Spain for another country in the EU.
There are a number of authorized partners that are authorized to refund VAT by the Tax Agency. Some of these are Global Blue, Tax Free Shopping Planet, Innova Tax Free Spain, Comerica Global Payments, Tax Free El Corte Inglés, B Free! Tax Back and Travel Tax Free.
You can access digital validation at the following Spanish ports or airports. If you are in Madrid, at the Adolfo Suárez Madrid-Barajas Airport, you can access digital validation at Terminals one and four and also Terminal four Satellite.
In Málaga you can access digital validation at the Málaga-Costa del Sol Airport. Port of Algeciras and Port of Tarifa are available in Cádiz. Alicante has Alicante-Elche Airport and the Port. When traveling in Valencia, you can access the validation at Valencia Airport. In Barcelona, you can access two points at Barcelona-El Prat Airport at Terminal One and Two.
You can also access your refund at Palma de Mallorca Airport if you are travelling in Palma de Mallorca.
You also have the option of receiving an advance refund. Global Blue allows you to receive your refund before stamping your forms at Customs on the last day of your trip in Spain. You can go to one of their offices or kiosks found across Madrid, Girona, Lloret de Mar, Valencia, Puerto Banus and Barcelona. All you need to do is present your credit card and send the Tax Free form to Customs within 21 days.
If you own a foreign business that supplies taxable goods to Spain, but are unable to register for a Spanish VAT number or your business is paying Spanish VAT on local goods, you may reclaim your VAT by making your application through your home country’s offices.
In some cases, Spain requires certain companies to supply additional statistical information in addition to their VAT returns. Your business is required to file a monthly list of your sales also known as dispatches and purchases or acquisition acquired within the EU, when you exceed the annual 250,000 EURO threshold. This is called the Spanish Intrastat. The EC sales lists gives a detailed account of the business dealings listing all sales, customers and their sales. It does not have a reporting threshold and should be submitted on a quarterly basis.
Do I need to register for VAT in Spain?
Foreign businesses do not need to form a local company to do business in Spain because they fall under the non-resident VAT trading. Since vat rules in Spain have no VAT threshold applied to the registration of non-resident business, the business must register in Spain for a VAT number before doing any business. Businesses can register their company with the Spanish Tax Office which will assign them a non-residents tax code(NIE/NIF).
It usually takes an average of two weeks for a business to be fully registered, this can vary in special cases, so it’s important to take this into account when designing your business plan. Our lawyers can help you find the best schedule to help you maximize the availability and revenue for your services.
You will need to provide certain documents to ease the process. They include a certificate of business from the country of origin, this is the place where your company was incorporated. You can find this certificate at the Company Registry Office. This document lists your company’s address and directors.
Our lawyers will provide a draft of a Power of Attorney, which will allow us to secure the tax code in Spain on your behalf. We will also provide a fiscal representation document that allows you to select your tax representatives in Spain. These documents must be notarized in your country and then translated to Spanish.
It is important for any business dealing in the supply of goods and services in Spain to check whether their products are taxable.
An easy way to know if your products are tax exempt is that only gold coins, ingots, gold bars and international air or sea travel are exempt for VAT at a rate of 0%. If your business deals in any of these products, you may not need to register for VAT in Spain, but it’s always important to confirm with a Spanish tax expert and our services are available to you. Please look at our contact page for more information.
Before you register, you must remember that Spain, like all EU member states, follows the EU VAT guidelines and requires local VAT registration for all foreign companies. Registration of the business for VAT is required in the following circumstances.
A business that imports goods into Spain must register for VAT, even when the business is only using Spain as a transit point to a final destination in a country that is part of the EU.
If a business is selling goods or services to consumers in Spain over the internet they are required to register for VAT. You should know that the internet VAT in Spain is determined by the Spanish distance threshold.
If a business is holding goods in a consignment warehouse located in Spain, it is deemed as a holding for a permanent business and therefore must have VAT registration. Businesses that charge admission fees for live events or exhibitions in Spain must register for VAT.
Since the implementation of the EU VAT package in 2010, there are nearly no scenarios that non-residents IVA registration is required for services provided in Spain. The system works to use customer transaction records which function by the reverse charge system.
Businesses must also have their EU VAT number verified before their first sale or issuing receipts to customers. This can be done using the IVA registration verifier.