Value Added Tax (VAT) in Spain: A Comprehensive Guide

Value Added Tax (VAT) in Spain

What is VAT?

VAT (Value Added Tax) is an indirect tax levied on the consumption of goods and services in Spain. It applies to the delivery of goods and services but does not apply to the Canary Islands, Ceuta, or Melilla, which have their own indirect tax systems.

Taxable Events

The following are considered taxable events for VAT purposes:

• Delivery of goods and services
• Intra-community acquisitions made by employers and professionals
• Imports of goods made by entrepreneurs, professionals, and individuals

Transactions Not Subject to VAT

The following transactions are not subject to VAT:

• Provision of services arising from labor relations or administration
• Delivery of free samples without commercial value for promotional purposes
• Delivery of forms or objects of advertisement without commercial value

Exemptions

Certain transactions are exempt from VAT, either fully or partially:

Full Exemption:

• Exports and shipments of goods
• Intra-community deliveries in Ceuta, Melilla, and the Canary Islands

Partial Exemption:

• These transactions are not subject to VAT but cannot deduct VAT paid on purchases.

Internal Operations Exempt from VAT:

• Medicine and healthcare
• Education
• Postal services
• Utilities
• Financial operations
• Delivery of land
• Leases of land
• Etc.

Tax Rates

16%:

• Deliveries of goods and services
• Intra-community acquisitions of services
• Imports

7%:

• Animals, plants, and other products
• Water for human consumption or animals
• Drugs for animal fodder
• Devices used to meet deficiencies of humans and animals
• Flowers, live plants, or ornamental plants
• Transport of passengers and baggage
• Hospitality services, spas, restaurants
• Postal services, theaters, cinemas, circuses, concerts, museums

4%:

• Bread, flour for breadmaking
• Milk, eggs, and processed cheese
• Fruits and vegetables
• Books, newspapers, and magazines
• Medicines for human consumption
• Cars, wheelchairs, and prosthetics
• Etc.

Deductions

Businesses can deduct the VAT they have paid on their purchases from the VAT they have collected on their sales. This deduction can be made in the settlement statement for the period of liquidation or within a maximum of four years from the date the right to deduct was acquired.

Deductible Assessments

Certain assets used for both professional and personal purposes are subject to a 50% deductible assessment, such as:

• Vehicles, tourism, trailers, motorcycles, and mopeds

Other items with limited deductibility include:

• Jewelry, precious stones, pearls, etc.
• Food, beverages, and tobacco
• Shows, entertainment, and recreational services
• Goods intended for customers and employees

Formal Obligations of Taxable Persons

Taxable persons have the following formal obligations:

• Start, modify, and terminate business activities
• Issue and deliver invoices for each transaction subject to tax and keep a duplicate
• Submit periodic statements
• Keep accounting books and records, including a logbook of issued and received invoices