VAT in SpainUpdated on Thursday 07th July 2016
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The value added tax (VAT) was introduced in Spain in 1986, after the country became a member of the European Union (EU) and nowadays the standard VAT tax rate is set out at 21%, being modified last time in 2012. The Spain taxation system provides different VAT rates for certain categories of goods and services, which are applicable at smaller rates; our team of Spanish lawyers can offer more details on the ways in which VAT is imposed to products and services sold on the local market.
Reduced VAT in Spain
Investors who are interested in establishing a business presence on the Spanish market should know that several products and services are imposed with a smaller VAT. At the moment, the local authorities apply two reduced VAT rates.
A lower rate of 10% is applied for the following:
- various categories of foodstuffs,
- hotel accommodation and restaurants,
- entertainment venues (sports related),
- certain drinks,
- sports activities,
- water supply,
- pharmaceutical products,
- medical equipment,
- public transportation.
Another reduced rate, established at 4%, is charged for certain food products and newspapers, magazines and books. The tax is applicable for several social security services, as well as for certain pharmaceutical products and several foodstuffs.
For financial and insurance activities, there are exemptions from VAT and these are applied also for doctors and dentists.
It is important to know that Canary Island, which is a part of Spain, also applies the VAT, but the standard rate differs, being set up at 7%.
The Spanish entity in charge with the VAT regulations is called Agencia Estatal de Administración Tributaria.
When do you have to charge VAT from clients?
Every company incorporated in Spain and making taxable supplies of goods and services needs a VAT registration in order to charge VAT. The companies incorporated in Spain must charge VAT from their clients in Spain and also for clients outside EU.
Persons who are interested in the formalities referring to the VAT registration can receive legal assistance from our law firm in Spain.
VAT returns must be submitted every quarter of a year, but if the annual turnover of a company exceeds a certain amount, the company has to submit the VAT returns monthly.
VAT registration in Spain
Foreign investors who are interested in trading goods and services on the Spanish market should know that they may register for VAT purposes without incorporating a new company in Spain. The VAT registration must be performed regardless of the company’s turnover, as the procedure should be completed before starting trading activities with Spain.
The VAT registration of non-resident companies in Spain is required in the following cases:
• any import activities in Spain;
• events and conferences organised in Spain by foreign entities;
• goods stored in Spain for resale purposes;
• selling goods from the local market to other European countries, members of the European Union.
For more details about VAT registration in Spain and how this tax is applied on tradable goods and services, please contact our Spanish attorneys, who will offer the necessary information.