Taxes in Spain: What is IVA (Value Added Tax)?

There are different taxes in Spain that you should take into account if you are thinking of establishing your company in this country. In this article we will be talking about IVA, abbreviated as ‘Impuesto sobre el Valor Añadido’, and is the equivalent of VAT.

What is VAT (IVA)?

The Spanish VAT is an indirect tax, the main feature of which is that it does not normally entail any cost for traders or professionals, only for the end consumer, because traders or professionals are generally entitled to offset their input VAT against their output VAT.

There are three types of IVA in Spain:

  1. Super reduced rate IVA – 4%
  2. Reduced rate IVA – 10%
  3. General rate IVA – 21%

Within Spain, VAT is not applicable in the Canary Islands, Ceuta and Melilla.

IVA / Spanish VAT obligations

From a business point of view, if you sell goods and provide services that are taxable, you are obliged to add the appropriate IVA rate and register before you start trading. Failure to do so will result in serious penalties.

Once you have registered for VAT in Spain, you have the following formal obligations:

  • Issue and deliver a full invoice to customers and keep a copy. However, for certain transactions in Spain, such as retail sales, a simplified invoice may be issued if the amount does not exceed €3,000 including VAT.
  • Ask for an invoice from suppliers and keep it to deduct the VAT paid.
  • Keep the following records: invoices issued, invoices received, capital goods, intra-Community transactions.
  • Submit the relevant periodic tax returns (monthly or quarterly) with the following forms and deadlines.

VAT rates and exemptions

The following transactions are subject to the Spanish VAT when they are carried out by traders and professionals in the course of their business:

  • Supplies of goods, generally defined as the transfer of the right to dispose of tangible property, although certain transactions not involving a transfer of this kind may also be treated as supplies of goods for the purposes of VAT.
  • Intra-Community acquisitions of goods (generally, acquisitions of goods dispatched or transported to Spanish VAT territory from another Member State).
  • Imports of goods: These transactions are subject to VAT regardless of who performs them.
  • Supplies of services.

If you are thinking of setting up your business in Spain and need more information about taxes in Spain, do not hesitate to contact us.

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