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VAT is called IVA in Spanish and is a tax which is based on the Spanish system of indirect taxation. There are three types of VAT in Spain: the general rate, the reduced rate and the super reduced rate. To start charging your clients VAT, you’ll need to make sure you know the rates really well and ensure that you know the whole Spanish tax system inside out.

VAT: companies versus clients

The last significant increase in the VAT rate in Spain was on 1 September 2012. This increase of 3 points enabled the government to cope a little better with the economic crisis but also to limit the consequences of fraud cases. Despite this recent increase, VAT in Spain does remain below the European Union average which is around 21.13%.

Tax burden has increased for consumers but not for companies whose profits are unaffected. Indeed, Spain has not changed the rate of corporation tax rate of 30% since 2008.

General VAT rate

21% is the standard VAT rate in Spain and this applies be default to most services and products for sale. Tobacco, alcohol, cosmetics and personal hygiene products are also charged at the same rate. Recently, some services that had previously been charged at a reduced rate are not charged at 21%: cinema and theatre tickets, hairdressers, funeral services, gardening etc.

Reduced VAT rate

The reduced rate of 10% applies to all food (meat, fish, water etc.) and health products, cars and the majority of services in hotels and housing construction. Buying a house, however, is exempt from this tax. The super reduced rate of 4% applies to basic food necessities such as bread, flour, eggs, cheese and fruits and vegetables. Books, newspapers, school supplies and medication are all also included in this.

Intra Community VAT

This VAT number is a 13 character identification number that facilitates exchanges between professionals within the European Union. This number must appear on all invoices for intra-community trade. The buying and selling of goods and services between EU companies are both subject this tax system. The export or sales of goods from Spain out to other European countries are also exempt from VAT.