We have previously mentioned the importance of taxes in the business world, so today we want to inform you about the equivalence surcharge in Spain. Do you know what it does? In this article we will tell you about it!

What is the equivalence surcharge in Spain?

The equivalence surcharge corresponds to a special VAT regime that involves retailers that do not carry out any type of transformation in the products they sell. Therefore, it should be noted that this surcharge applies to individuals, self-employed, companies or communities of goods.

In this way, retailers are expected to pay VAT directly to their suppliers, without having to go through the return process again before the Tax Agency.

Who are considered retailers?

Are you in doubt about who is considered a retailer today? To find out, it is important to know what the IRS establishes:

Retailers are those persons who habitually sell movable goods that do not undergo a manufacturing, processing or transformation process, either by the same person or by a third party.

Likewise, during the previous year, more than 80% of the volume of sales must be made to private individuals or end consumers.

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In which cases does the equivalence surcharge apply in Spain?

Whether or not to charge the equivalence surcharge in Spain will be defined by how you are registered with the tax authorities, which is a key starting point when it comes to your accounting.

As mentioned above, this measure is valid for retailers who buy from a supplier and sell directly to the public; individuals or entities with attribution of income for personal income tax purposes.

On the other hand, it is important to emphasize that, depending on what your business consists of, you will have to make the payment or you will be exempt from it.

Below is an outline of those businesses whose activities are not applicable to the equivalence surcharge in Spain:

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What are the types of equivalence surcharge?

According to Royal Decree Law 20/2012, suppliers must include in the invoice the VAT plus the percentage associated with the equivalence surcharges in Spain, and they are established as follows:

• For the VAT rate corresponding to 21%, the equivalence surcharge will be 5.2%.

• For the VAT rate corresponding to 10%, the equivalence surcharge will be 1.4%.

• For the VAT rate corresponding to 4%, the equivalence surcharge will be 0.5%.

• For tobacco, the equivalence surcharge will be 1.75%.

In this way, if you are subject to the regime, you will be obliged to inform your supplier, so that the measure can be carried out and you can pay the VAT surcharge directly.

Obligations associated with the equivalence surcharge

By adopting the equivalence surcharge in Spain, both retailers and suppliers must comply with a series of obligations. Do you want to know what they are? Here we explain them to you:

If you are a retailer

• You will not have to file a VAT return, but you will have to keep your income tax books up to date according to the selected regime.

• You must inform suppliers that you are subject to the equivalence regime.

• You will not have to issue invoices on a mandatory basis, unless your customers request it.

• In case of selling products to travelers entitled to the TaxFee, you will be obliged to file form 308 requesting a refund of the equivalence surcharge.

If you are a supplier

• You will be obliged to include the equivalence surcharge in the invoices issued.

• At the time of filing the VAT return, you will be obliged to declare the equivalence surcharge as output VAT.

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Advantages and disadvantages of the equivalence surcharge in Spain

There is no doubt that the main benefit of applying the equivalence surcharge in Spain is to eliminate much of the administrative and accounting work associated with making the declarations.

Another advantage that is often appreciated is that it saves time for retailers.

However, the disadvantages include the fact of not being able to deduct or recover input VAT, which means, to a certain extent, that in the long run the acquisition cost of the products to be offered will be higher.

Likewise, VAT on investments made within the business is considered an unfavorable aspect, since it cannot be deducted either.

Now that you know about the equivalence surcharge regime in Spain you will have realized that there are certain regulations by the Treasury that apply to both suppliers and retailers. In TAS Consultancy we have tax experts who can advise you when making your declarations. So do not wait any longer and contact us here!