VAT, GST and Sales Tax in Spain

Summary

Name of the tax Value-added tax (VAT)
Local name Impuesto sobre el Valor Añadido (IVA)
Date introduced 1-Jan-86
Trading bloc membership European Union (EU) Member State
Administered by Ministry of Finance (http://www.aeat.es and http://www.mindhap.es)
VAT rates
Standard 21%
Reduced 4%, 10%
Other Exempt and exempt with credit
VAT number format A – 1 2 3 4 5 6 7 8 or N – 1 2 3 4 5 6 7 C (ES prefix must be added if the taxable person is included in the VAT Information Exchange System [VIES] census)
VAT return periods Monthly (if turnover exceeded EUR6,010,121 in the preceding year or if the taxable person is included in the monthly VAT refund procedure), Quarterly Annual statement (required for all taxable persons)
Thresholds
Registration None
Distance selling EUR35,000
Intra-Community acquisitions None
Recovery of VAT by non-established businesses Yes (under certain conditions)

Scope of the tax

VAT applies to the following transactions:

  • The supply of goods or services made in Spain by a taxable person
  • The intra-Community acquisition of goods from another EU Member State by a taxable person
  • The importation of goods from outside the EU, regardless of the status of the importer
  • Reverse charge on goods and services received by a taxable person in Spain

For VAT purposes, the territory of Spain excludes the Canary Islands, Ceuta and Melilla.

Who is liable

A “taxable person” is any business entity or individual that makes taxable supplies of goods or services, intra-Community acquisi­tions, imports or distance sales in the course of a business in Spain.

The reverse-charge mechanism applies to, among others, certain supplies in connection with immovable property.

No VAT registration threshold applies in Spain. A taxable person that begins its activity must notify the VAT authorities of its liabil­ity to register.

Special rules apply to foreign or “non-established businesses.”

Group registration. VAT grouping is allowed under Spanish VAT law. Notwithstanding this rule, companies that belong to the same group must register for VAT individually.

Non-established businesses. A non-established business that makes supplies of goods or services in Spain must register for VAT if it is liable to account for Spanish VAT on the supply.

The reverse-charge mechanism generally applies to supplies made by non-established businesses to taxpayers. Under this mecha­nism, the taxpayer is the recipient of the goods or services supplied.

If a foreign taxable person supplies goods to a company estab­lished in Spain, the recipient of the supply becomes liable for VAT purposes. However, the reverse-charge mechanism does not apply to certain items, including the following:

  • Goods acquired through distance or mail-order sales
  • Exempt exports
  • Exempt intra-Community supplies

The reverse-charge mechanism also applies if a foreign taxable person supplies goods to another foreign taxable person.

If a foreign taxable person supplies services to a company estab­lished in Spain, the company established in Spain is treated as the taxpayer.

If a foreign taxable person supplies services subject to Spanish VAT to another foreign taxable person, in general, the supplier is liable for the VAT due.

Tax representatives. A non-established business must register in Spain for VAT purposes if it makes any of the following supplies:

  • Intra-Community supplies or acquisitions
  • Distance sales in excess of the threshold
  • Supplies of goods and services that are not subject to the reverse-charge mechanism
  • Exports

In general, non-established taxpayers must appoint a tax repre­sentative in Spain.

Taxable persons established in the EU, foreign companies estab­lished in the Canary Islands, Ceuta or Melilla, and foreign com­panies established in a country that has a mutual assistance agreement with Spain, are exempt from the above general rule. However, in practice, the tax authorities require the appointment of a VAT representative even for companies established in the EU, because it is mandatory to have a Spanish address where commu­nications issued by the tax authorities can be easily received.

Registration procedures. To obtain a Spanish tax identification number, the applicant files a census return (036 form) with the Spanish tax authorities. This form must be filed physically (no electronic means) together with relevant documentation such as a deed of incorporation and a power of attorney, among others.

The Spanish tax authorities require the person or persons signing on behalf of a nonresident entity for the purposes of its registra­tion to have a nonresident ID number in Spain. Therefore, a new 030 form is required by the Spanish tax authorities in connection with the registration of nonresident entities.

Although this obligation could be argued according to law (it is not required according to the wording of the VAT Act currently in force), the Spanish tax authorities are refusing to register non­resident entities without the ID numbers of their representatives.

In principle, the registration should be performed before the commencement of the economic activity in Spain; however, it is a common practice to request the registration on the same date that the economic activity would start.

Once all the necessary information is gathered, the registration should be obtained on the same day that the registration return (036 form) is filed.

Late-registration penalties. A penalty of ELJR400 may be assessed for late registration. This penalty may be reduced to ELJR200 if the taxpayer registers voluntarily (albeit late) without receiving a prior request from the Spanish tax authorities.

Digital economy. As of January 2015, the place of supply for ser­vices rendered through electronic means to private individuals is the place where the recipient is established.

Mini One-Stop Shop. In connection with the special scheme appli­cable to services rendered through electronic means:

  • The regime is applicable, not only to business-to-consumer (B2C) services rendered through electronic means, but to B2C telecommunications services, radio and television broadcasting services.
  • A simplification is included in order to avoid VAT registration in each Member State for e-suppliers, businesses providing B2C services rendered through electronic means are allowed to file a single, periodical VAT return and payment in connection with its supplies in each Member State.

Deregistration. To deregister for VAT purposes, the taxpayer sub­mits, either physically or online, a census return (036 form) to the Spanish Tax Authorities.

Deregistering from the census as a professional entrepreneur involves more, as it cancels the tax identification number. The same census return (036 form) is submitted in the same way, but it must be accompanied by additional documentation.

VAT rates

The following are the VAT rates in Spain:

  • Standard rate: 21%
  • Reduced rates: 4% and 10%

The standard rate of VAT applies to all supplies of goods or ser­vices, unless a specific measure provides for a reduced rate or exemption.

Examples of goods and services taxable at 4%

  • Basic foodstuffs
  • Books, journals and magazines
  • Pharmaceutical products for humans
  • Certain goods and services for handicapped persons
  • Provision of housing from 20 August 2011 through 31 December 2012

Examples of goods and services taxable at 10%

  • Food and drink for human or animal consumption
  • Pharmaceutical products for animals
  • Prescription glasses and contact lenses
  • Medical equipment (from January 2015, certain medical equip­ment taxed at standard 21% rate)
  • Residential dwellings
  • Passenger transport
  • Hotel and restaurant services
  • Garbage collection
  • Trade fairs and exhibitions

Exempt supplies generally do not give rise to a right to deduct input VAT paid.

Examples of exempt supplies of goods and services

  • Immovable property, in certain cases
  • Medical services
  • Finance
  • Insurance
  • Universal postal services

Option to tax for exempt supplies. The option to tax supplies of real estate goods (land or building) was modified as of January 2015. Taxpayers may opt to pay tax on such supplies if:

  • The recipient has the right, total or partial, to deduct input VAT.
  • The recipient has no right to deduct input VAT, but the goods acquired would be destined, totally or partially, to carry out operations giving the right to deduct input VAT.

Time of supply

The time when VAT becomes due is called the “time of supply” or “tax point.” The basic time of supply for goods is when the goods are placed at the disposal of the purchaser. The basic time of sup­ply for services is when the service is performed. If the service is ancillary to a supply of goods, the time of supply is when the goods are placed at the disposal of the purchaser. A VAT invoice must generally be issued at the time of supply.

Prepayments. The tax point for prepayments or advance pay­ments is the date when the advance payment is received.

Intra-Community supplies and acquisitions of goods. The time of supply for intra-Community supplies of goods is the earlier of the 15th day of the month following the month in which the goods are removed from the supplier or the date when the invoice is issued. Regarding intra-Community acquisitions of goods, the tax point is the time when the goods are placed at the consumer’s disposal. The general rule for prepayments does not apply to intra-Community supplies and acquisitions of goods; that is, a prepayment does not modify the tax point.

Imported goods. The time of supply for imported goods is the date of importation (according to the customs documents), or the date on which the goods leave a duty suspension regime.

Cash accounting. A cash accounting scheme came into effect in Spain with effect from 1 January 2014. Under this scheme, tax­payers report the VAT charged on sales of goods or supply of services on the date when the payment is received, and the right to deduct input VAT arises when payment is made. The scheme is optional and is subject to certain requirements.

Reverse-charge services. No specific tax point rules apply.

Continuous supplies of services. The tax point is when each pay­ment is due.

Leased assets. The tax point is when each payment is due.

Recovery of VAT by taxable persons

A taxpayer may recover input tax, which is VAT charged on goods and services supplied for business purposes. A taxpayer generally recovers input tax by deducting it from output tax, which is VAT charged on supplies made. Input tax may be deducted in the accounting period in which the output VAT was charged or in any successive period, up to a period of four years from the time of supply.

Input tax includes VAT charged on goods and services supplied in Spain, VAT paid on imports of goods and VAT self-assessed on intra-Community acquisitions of goods and reverse-charge transactions.

A valid tax invoice or customs document is required to apply for input tax deduction.

Nondeductible input tax. Input tax may not be recovered on pur­chases of goods and services that are not used directly and exclu­sively for business purposes. In addition, input tax may not be recovered for some items of business expenditure.

In general, input VAT may be claimed with respect to travel, hotel and restaurant expenses if the Spanish corporate income tax law allows for a deduction, which is often the case.

The following lists provide some examples of items of expendi­ture for which input tax is not deductible and examples of items for which input tax is deductible if the expenditure is related to a taxable business use.

Examples of items for which input tax is nondeductible

  • Business entertainment
  • Business gifts (unless of very low value)
  • Alcohol and tobacco
  • Private expenditure

Examples of items for which input tax is deductible (if related to a taxable business use)

  • 50% of purchase, hiring, leasing, maintenance and fuel for cars, vans and trucks (a higher percentage of deduction is allowed if the taxable person provides to the authorities evidence proving that the percentage of time used for business purposes exceeds 50%)
  • Attending conferences, seminars and training courses
  • Advertising
  • Business use of home telephone or mobile phone
  • 50% of parking
  • Taxis, restaurant meals, hotel accommodation and travel expens­es if the expense is allowable under the Spanish income tax or corporate tax law or if the taxable person has the appropriate documentation (generally, an invoice)

Partial exemption. Input VAT directly related to the making of exempt supplies is, as a rule, not recoverable. If a Spanish taxable person makes both exempt and taxable supplies, it may not recover input VAT in full. The amount of input VAT that a par­tially exempt business may recover is calculated using the gen­eral pro rata method or the direct allocation method. The general pro rata method is generally used unless the taxable person chooses the direct allocation method. However, the direct alloca­tion method must be used if the general pro rata method provides a VAT recovery amount that exceeds by 20% (10% starting in 2015) or more the amount of input tax recoverable using the direct allocation method.

General pro rata method. The general pro rata method is based on the ratio of taxable turnover and total turnover during the calendar year. Because the taxpayer cannot know its annual ratio for the current calendar year when filing its periodic VAT returns, the pro rata percentage for the preceding year or an agreed provi­sional percentage is used. The calculation is regularized in the last period of the VAT year (that is, the actual figures for the year are calculated and applied and any further adjustment is made).

Direct allocation method. The direct allocation method consists of the following two-stage calculation:

  • In the first stage, the taxpayer must distinguish between input VAT that corresponds to taxable and to exempt supplies. Input VAT directly allocated to taxable supplies is deductible, while input VAT directly related to exempt supplies is not deductible.
  • The remaining input VAT that is not allocated directly to exempt and taxable supplies is apportioned using the general pro rata method. The recovery percentage is rounded up to the nearest whole number (for example, a percentage of 16.3% is rounded up to 17%).
  • Effective 1 December 2013, taxable persons can opt for the direct allocation method in December of the current year. That method is then applied to the deductions for that whole year and in the following two years. Prior to 1 December 2013, the direct allocation option did not include the current year and covered the following three years.

Deductions in different sectors. If a taxable person undertakes activities in different economic sectors, it must apply different methods to calculate the partial exemption deduction for each sector, as if each economic activity were carried out by an inde­pendent business. This rule applies if the business undertakes activities that are subject to different pro rata recovery percent­ages. A business is deemed to undertake such activities in the following circumstances:

  • The activities fall under different groups according to the national classification of economic activities.
  • The pro rata percentage for VAT recovery for one economic sector of the business differs by more than 50 percentage points (either higher or lower) from another sector of the business.

If goods or services are used in one of the distinct economic sec­tors, the VAT paid is recovered according to the pro rata recovery percentage for that sector. However, if goods or services are used by more than one economic sector, the amount of VAT recovered must be based on the general pro rata method.

Capital goods. Capital goods are items of capital expenditure that are used in a business over one year and that have an acquisition price exceeding EUR3,000. Input VAT is deducted in the VAT year in which the goods are acquired and first used. The amount of input VAT recovered depends on the taxpayer’s pro rata recov­ery percentage in the VAT year of acquisition and first use. However, the amount of input VAT recovered for capital goods must be adjusted over time if the taxable person’s pro rata recov­ery percentage differs by 10 percentage points during the adjust­ment period or if the goods are transferred or sold during the adjustment period.

In Spain, the capital goods adjustment applies to the following assets for the number of years indicated:

  • Immovable property: adjusted for a period of 10 years (the year of the acquisition and first use and the following nine calendar years)
  • Movable property: adjusted for a period of five years (the year of the acquisition and first use and the following four calendar years)

The adjustment is applied each year following the year of acqui­sition and first use, to a fraction of the total input tax (1/10 for immovable property and 1/5 for other movable capital goods). The adjustment may result in either an increase or a decrease of deductible input VAT, depending on whether the ratio of taxable supplies made by the business increases or decreases, compared with the year in which the capital goods were acquired and first used.

Refunds. If the amount of input VAT recoverable exceeds the amount of output VAT payable, a refund may be claimed. A business may choose to request a refund of the excess VAT or to carry it forward to offset output VAT in the following four years.

Two different procedures are available with respect to applications for refund of the excess input VAT. These procedures are sum­marized below.

General procedure. Under the general procedure, the taxable person may only apply for the refund in the last VAT return of the year (monthly or quarterly). The tax authorities have a six-month period beginning on the date of the application to analyze wheth­er the taxable person has the right to obtain the refund. After such term is exceeded, delay interest on the refund due is payable to the taxable person.

Special procedure. Under the special procedure, the taxable per­son may apply for inclusion in the monthly VAT refund census. Taxable persons included in such a census may apply for the VAT refund in each monthly VAT return. The tax authorities have a six-month period beginning on the date of the application to analyze whether the taxable person has the right to obtain the refund. After such term is exceeded, delay interest on the refund due is payable to the taxable person.

Preregistration costs. Not applicable.

Write-off of bad debts. As of 2015, entities with a turnover of EUR6,010,121.04 or lower could consider that a credit qualifies as bad debt, and thus, the taxable amount could be modified once six months or one year has elapsed as of the date of the accrual.

The term to amend the taxable base is extended from one to three months, as of the date of bankruptcy declaration.

Noneconomic activities. Not applicable.

Recovery of VAT by non-established businesses

Spain refunds VAT incurred by businesses that are not estab­lished in Spain. Non-established businesses may claim Spanish VAT to the same extent as VAT-registered businesses.

For businesses established in the EU, refund is made under the terms of the EU 2008/9/EC Directive (one-stop shop system from 1 January 2010). For businesses established outside the EU, refund is made under the terms of the EU 13th Directive on the condition of reciprocity. Spanish VAT is refunded only to non-EU claimants established in Canada, Israel, Japan, Monaco, Norway and Switzerland. A non-EU claimant must appoint a VAT repre­sentative in Spain.

The condition of reciprocity is not required in connection with input VAT borne on accommodation, travel and restaurant ser­vices related to attendance at fairs or exhibitions in Spain.

For the general VAT refund rules under the EU 2008/9/EC Directive and the EU 13th Directive, see the chapter on the EU.

Refund application. As a result of the entry into force of the EU VAT Package, effective from 1 July 2010, VAT refund applica­tions corresponding to VAT borne in Spain by non-established businesses from the EU are filed in the EU country where the business is established instead of with the Spanish tax authorities.

Applications from businesses not established in Spain or in another EU country must continue to be filed with the Spanish tax authorities.

Repayment interest. The Spanish VAT authorities have made the commitment to pay refunds within four months after the date on which the claim for a refund is submitted, but if additional infor­mation is requested, the reimbursement procedure could take up to eight months. Interest is paid on late refunds.

Invoicing

VAT invoices and credit notes. A Spanish taxpayer must generally provide a VAT invoice for all taxable supplies made, including exports and intra-Community supplies. VAT invoices are not automatically required for certain transactions if the taxable amount does not exceed EUR400 (EUR3,000 for certain retail transactions). Simplified invoices are issued instead, unless requested by the customer.

A VAT invoice is necessary to support a claim for input VAT deduction or a refund under the EU 2008/9/EC Directive or the EU 13th Directive refund schemes (see the chapter on the EU).

A credit note (factura rectificativa) must be cross-referenced to the original invoice and must contain the same information together with the reason for the amendment and the final cor­rected position.

Electronic invoicing. Effective 1 January 2013, the VAT law has been amended to permit electronic invoicing in line with EU Directive 2010/45/EU. As of 15 January 2015, it is mandatory to issue electronic invoices in connection with the supplies per­formed with Spanish public entities.

Effective January 2017, a new reporting system for invoices called Immediate Supply of Information (ISI) is expected to come into force. Under this system, taxpayers who file VAT returns monthly will be required to maintain and submit VAT books electronically. The new requirement will be optional for other taxpayers. Under this system, all invoices issued and received for VAT purposes must be transmitted electronically and almost immediately to the Spanish tax authorities so they have all information about operations carried out by VAT taxpayers in real time.

Proof of exports and intra-Community supplies. VAT is not charge­able on supplies of exported goods or on intra-Community sup­plies of goods (see the chapter on the EU). However, to qualify as zero-rated, exports and intra-Community supplies must be supported by evidence that the goods have left Spain. Accept able proof includes the following documentation:

  • For an export, the documentation consists of the customs dec­laration (export SAD) with evidence that it was filed and admit­ted by the customs authorities, transport documents and an indication on the invoice of the article of the Spanish VAT law that allows exemption with credit for the supply.
  • For an intra-Community supply, the supplier must retain a copy of the invoice indicating the customer’s valid VAT identification number (issued by another EU Member State), together with a range of commercial documentation, such as bills of lading, transport documentation and proof of payment.

Foreign-currency invoices. If a VAT invoice is issued in a foreign currency, the values for VAT purposes and the VAT amounts must be converted to euros. The exchange rate that is used must be the official selling rate published by the Bank of Spain for the date on which the VAT is due. The VAT amount must be expressly stated in euros.

B2C invoices. Effective 1 January 2015, new rules apply to the place of supply for supplies of telecommunications, broadcasting and electronic services to non-VAT taxable customers. For fur­ther details of the VAT rules on electronic services in the EU, please refer to the European Union chapter.

Spanish suppliers of these services are required to issue invoices to nontaxable customers.

VAT returns and payment

VAT returns. Periodic VAT returns are submitted in Spain on a monthly or quarterly basis, depending on the taxable person’s turnover and activities. All taxable persons must also complete an annual summary VAT return.

Taxable persons whose turnover in the previous year exceeded EUR6,010,121 must file their VAT returns on a monthly basis. Taxable persons included in the monthly VAT refund census must also file monthly VAT returns (and the VAT books [Form 340]), because they are entitled to apply for a VAT refund on a monthly basis.

Periodic VAT returns must be filed and paid by the due date. Quarterly VAT returns must be submitted and paid by the 20th day of the month following the end of the quarter for the first three calendar quarters, and by 30 January of the following year for the last calendar quarter. Monthly VAT returns must be filed and the tax paid by the 20th day of the month following the month of the assessment.

The annual summary VAT return must be filed by 30 January.

Special schemes. The special scheme for travel agencies has been modified following the ECJ’s judgment in case C-189/11, dated 26 September 2013, including among others the opt-out possibil­ity in connection with B2B supplies where the normal VAT regime could be applied.

The special scheme for services rendered through electronic means is modified following the ECJ’s judgment in case C-360/11 dated 17 January 2013, as follows:

  • The regime is applicable, not only to business-to-consumer (B2C) services rendered through electronic means, but also to B2C telecommunications services, radio and television broad­casting services.
  • A simplification is included in order to avoid VAT registration in each Member State for e-suppliers: businesses providing B2C services rendered through electronic means would be allowed to file a single, periodical VAT return and payment in connection with its supplies in each Member State.

The special group entities scheme has new requirements:

  • All entities within the group must be bound by financial, eco­nomic and organizational links.
  • Holding companies can be the dominant entity of a VAT group.

Electronic filing and archiving. VAT returns (303 forms) and the Informative Annual Summary VAT return (390 form) must be filed through electronic means by using an electronic signature owned by the taxpayer or a third party duly empowered. When the VAT returns (303 forms) result in amounts to be paid or refunded, a Spanish bank account number is required.

Annual returns. The Informative Annual Summary VAT return (390 form) contains the information declared in the periodical VAT returns of the corresponding calendar years and additional information. It must be filed electronically between 1 January and 30 January of the following year.

Penalties

The following surcharges apply to the late submission of VAT returns or late payment of VAT before any request by the tax authorities:

  • Delay up to three months: 5% of the tax due
  • Delay between three months and six months: 10% of the tax due
  • Delay between 6 months and 12 months: 15% of the tax due
  • Delay longer than 12 months: 20% of the tax due plus interest

EU filings

Intrastat. A Spanish taxable person that trades with other EU countries must complete statistical reports, known as Intrastat, if the value of its EU sales or purchases of goods exceeds certain thresholds. Separate reports are required for intra-Community acquisitions (Intrastat Arrivals) and for intra-Community sup­plies (Intrastat Dispatches).

The current threshold for Intrastat Arrivals is EUR400,000. The current threshold for Intrastat Dispatches is also EUR400,000.

The Intrastat return submission period is monthly. The submis­sion deadline is the 12th day following each month. A taxable person required to file Intrastat returns must file them each month even if they are nil returns.

The penalty for late or incorrect filing depends on the level of infringement. Penalties range from EUR60 to EUR30,050.

EU Sales and Acquisitions List. If a Spanish taxable person makes intra-Community supplies or intra-Community acquisitions of goods and/or services in any return period, it must submit an EU Sales and Acquisitions List (ESAL). An ESAL return is not required for any period in which the taxable person does not make any intra-Community supplies or acquisitions of goods and/or services.

In principle, ESAL returns are submitted on a monthly basis. However, ESAL returns must be filed on a quarterly basis if the intra-EU supplies of goods and/or services performed in the cur­rent quarter or during the four preceding calendar quarters do not exceed the threshold of EUR50,000.

Taxable persons whose turnover does not exceed EUR35,000 may file annually under certain conditions.

ESALs must be submitted by the 20th day of the month following the end of the monthly or quarterly filing period. The last month­ly or quarterly ESAL for a year must be filed by 30 January of the following year.

Penalties may be imposed for late, missing or inaccurate ESALs.