Spain is one of the most popular vacation destinations for Europeans. It is therefore not surprising that many local companies want to expand their business to the sunny tip of the country with its islands. There are few barriers to entry, but many companies that venture abroad fail because of the tax laws that apply there. In this article you will find everything you need to know about VAT in Spain.
Antonia Klatt
Last Updated on 22 October 2021Where does the Spanish VAT law apply?
This question may seem a bit surprising at first, but it is essential because the Spanish VAT law is not applied in the whole of Spain. The Spanish VAT law is valid on the Balearic mainland and on the islands of Mallorca, Menorca, Ibiza and Formentera.
The African cities of Melilla and Ceuta and the Canary Peninsulas have their own laws and, as far as VAT is concerned, are considered third countries for European companies.
Related articles
Current Spanish VAT rates
The sales tax in Spain is called “impuesto sobre el valor añadido”, IVA for short. Currently, the regular VAT is 21%. However, this is not always the case. Spain has experimented a lot with different tax rates in the past. The tax rates were changed again and again, in the meantime a luxury tax was introduced. Since 1993, four different tax rates have been agreed upon:
- Regular VAT rate (IVA Tipo General) of 21%
- Reduced VAT rate (IVA Tipo reducido) 10%
- Highly reduced VAT rate (IVA superreducido) 4%.
- Waived VAT rate (Zero IVA) 0%
Each of these tax rates is used in specific fields of activity.
Regular Spanish VAT rate (IVA Tipo General)
The regular tax rate of 21% is used to tax all goods that are not treated with the reduced tax rates.
Reduced Spanish VAT rate (IVA Tipo reducido)
The reduced tax rate of 10% applies to basic services, medical care, various foodstuffs, agricultural products and products for daily use. Basic services include, for example, transportation fees for public transport and cabs.
All catering, bars, nightclubs and restaurants also fall under the reduced tax rate. Restaurant invoices are taxed at 10% under Spanish VAT law.
Furthermore, medical as well as social services are subject to 10% VAT. This includes, for example, products for people with disabilities or school fees.
The entertainment industry, which includes cinemas, theaters and amusement parks, is taxed at the reduced VAT rate, just like the tourism industry. Hotel bills, movie tickets, gym subscriptions, etc. fall under this.
Some food products, for example soft drinks, are subject to 10% VAT. Basic foodstuffs are subject to the heavily reduced tax rate, but more on that later.
The real estate industry is also divided into two sales tax classes. Construction work and some building materials for new houses are taxed at 10%.
Highly reduced tax rate (IVA superreducida)
A tax rate of only 4% is applied to medicines, basic foodstuffs and various printed matter such as books, newspapers and magazines. The 4% tax rate is applied to the construction and supply of houses and to renovations and repairs of existing real estate.
In addition, there are the already mentioned basic foodstuffs such as water, flour and vegetables.
Waived VAT rate (Zero IVA)
In some cases, the VAT obligation is completely waived. For the purchase and sale of gold, as well as for passenger transports that cross national borders, the Spanish state completely waives the VAT.
Care must be taken with the many special regulations surrounding the four different tax rates. Many sectors, such as the food industry and construction, are divided among several tax brackets depending on the product or service. It is usually not easy to understand when you have to pay which tax rate. In this case, it is advisable to seek advice from a tax expert.
Book a free consultation
Our VAT experts are happy to help you. Book a free consultation today!
Obligations of the company
If you want to do business in Spain as a company, it is important to be familiar with the VAT law and the associated obligations. From the proper registration of the company with the tax office, the error-free invoicing to the flawless submission of VAT returns and the annual summary, everything must be correct.
The VAT registration and the application for the CIF tax number are the first important steps for a German company.
VAT registration in Spain
If a non-Spanish company sells goods or services in or to Spain, it is obliged to register with the tax office, apply for a CIF number and pay VAT in Spain, taking into account all the given guidelines.
Exceptions to this are only direct sales to a Spanish company or a transfer of goods on Spanish territory. There is no threshold above which registration with the tax office is required; every company must register. With such a registration, one must expect a processing time on the part of the Spanish tax office of about two to three weeks.
Spanish tax number CIF
The Spanish tax number, “Código de Identificación Fiscal (CIF)” must be requested by companies that have to file tax returns, tax payments and the mandatory annual summary in Spain.
Invoicing in Spain
In Europe, the forms of invoicing usually do not differ. However, there are differences in the information that must be on the invoice. Every invoice issued in Spain must contain the following data:
- Date of the invoice
- Date of the transaction described on the invoice
- CIF number of the supplier
- Address of the supplier and the customer
- Description of the services and/or goods sold
- Indication of the quantity of the sold product
- Net value of the goods sold
- Gross value of the goods sold
- Applied VAT rate
- Disclosure of discounts applied
- Exchange rates of any foreign currencies
The invoices as well as proofs of keeping the specified accounts must be kept for at least ten years. Foreign currency exchange rates as well as corrections to a relevant document must also be recorded.
VAT return in Spain
The VAT return must be submitted by each company to the Spanish Tax Office on a monthly or quarterly basis.
Quarterly VAT declarations are only possible for companies whose annual turnover does not exceed 6,010,121 euros.
The monthly VAT return must be submitted by the 20th of the month following the month to which the return relates. The transmission to the tax office takes place exclusively via electronic means. For the month of December, however, it can be submitted until January 30 of the following year.
In addition to the VAT returns, the Spanish tax office requires an additional annual summary each year.
Annual summary
Every company that does business in Spain must send a summary of all the services it has generated to the Tax Office at the end of the year. Even companies that have not done business in Spain this year, but have a CIF number, are required to send a standardized letter to the tax office stating that they have no tax liability to pay this year.
Other documents
In addition to the documents just mentioned, further information can also be requested. If goods with a total value of more than 250,000 euros are shipped every month, the Spanish tax authorities require the company to provide intra-trade statistics (Intrastat).
Register for VAT in Spain
Submit VAT Return in Spain
VAT tax refund in Spain
Companies that have provided taxable services in Spain but have not received a CIF tax number for various reasons can reclaim the VAT paid from the tax office. The permissible refund period must be at least three months of a year.
The minimum amount from which a VAT refund is initiated for a period of three months is 400 euros; if the period is one year, the minimum amount drops to 50 euros. These requests must be sent electronically to the tax office in the company’s home country, but they are processed by the Spanish authorities.
Summary
In summary, the Spanish VAT law differs in some points considerably from the one in Germany. For companies that do business in Spain, but still want to be on the safe side from a tax point of view, a tax advisor in Spain is highly recommended.
FAQ’s
The value added tax in Spain is called “impuesto sobre el valor añadido”, IVA for short.
There are 4 different Spanish VAT rates. There is the regular VAT rate (21%), the reduced VAT rate (10%), the highly reduced VAT rate (4%) and the waived RAT rate (0%).
Companies that have provided taxable services in Spain but have not received a CIF tax number for various reasons can reclaim the VAT paid from the tax office. The permissible refund period must be at least three months of a year.
The minimum amount from which a VAT refund is initiated for a period of three months is 400 euros; if the period is one year, the minimum amount drops to 50 euros. These requests must be sent electronically to the tax office in the company’s home country, but they are processed by the Spanish authorities.