We have already told you how VAT works in Spain and IGIC in the Canary Islands, but have you heard of IPSI? A similar tax from which Ceuta and Melilla could not escape. So stay with us in this article and learn more about it!
What is the IPSI?
The IPSI, also known as the Tax on Production, Services and Imports, is a type of indirect tax levied on both the importation and processing of goods and services in the autonomous cities of Ceuta and Melilla.
Like the Canary Islands, although Ceuta and Melilla are part of the Spanish territory, they have their own tax regime. This is due to their privileged status as free ports or free ports.
Thus, the IPSI is officially established by Law 8/1991, of March 25, and the following operations carried out by businessmen or professionals are taxed:
The production or processing of movable tangible goods and their respective importation.
The rendering of services
The delivery of real estate
The consumption of electric energy
You may be interested in: The Beckham Law: A benefit for foreigners in Spain
IPSI tax rates
According to the bylaws of Ceuta and Melilla, taxes are set according to minimum and maximum limits ranging from 0.5% to 10%.
In the case of Ceuta
Those tangible personal property intended for cultural or educational activities without profit motive must be taxed at 0.5%.
Movable tangible property intended for the production of electricity is taxed at 5%.
The general tax rate is 10%.
Telecommunications, television and radio broadcasting services are taxed at 10%.
Legal, financial, accounting, accounting, engineering, architectural and urban planning services are taxed at 9%.
One-fork restaurants, cafés, bars and cabs are taxed at 2%.
Construction and first transfer of real estate are taxed at 4%.
Electricity consumption should be taxed at 1%.
In the case of Melilla
The delivery of real estate must be taxed at 4%, but if they are subsidized housing, they must be taxed at only 0.5%.
The construction and execution of works on real estate should be taxed at 10%.
The works of reform or reconstruction of businesses and dwellings must be taxed at 4%.
Collective land transportation services are taxed at 0.5%.
One-fork restaurants, cafés, bars and car cabs should be taxed at 1%, and those restaurants with two or more forks should be taxed at 2%.
Telecommunications, television and radio broadcasting services are taxed at 8%.
You may be interested in: How to become self-employed in Spain if you are a foreigner?
The individuals, legal entities or entities that deliver goods or provide services will be considered taxpayers.
On the other hand, in the case of businessmen or professionals who are established outside the territory of Ceuta or Melilla and carry out the delivery of real estate goods and provision of services, the taxpayer of the tax will be the addressee.
Finally, those individuals or legal entities that carry out imports will be subject to IPSI.
How is IPSI billed?
Taking into account the location of Ceuta and Melilla and their close commercial relationship with the Peninsula, there are certain aspects to consider when issuing an invoice:
If the recipient of the product is a private individual in Ceuta and Melilla, the invoice must be issued with VAT.
In the case of offering telecommunications, radio and television broadcasting services to a private individual in Ceuta and Melilla, the invoice must be issued with IPSI.
On the other hand, specific services such as financial services, consultancy, engineering or advertising that are provided in Ceuta and Melilla must be invoiced with VAT, since it is considered that the exploitation and utility are carried out in the Peninsula.
You may be interested in: Taxes in Spain for foreigners
Developing in the business world and carrying out commercial transactions or professional activities is directly related to the payment of taxes, and in the case of Ceuta and Melilla you have already seen that there is a special tax called IPSI.
Do you have any relationship with these autonomous cities or are you thinking of offering goods or services in them? Our tax experts at TAS Consultancy can advise you on every step you need to take, so log on to our website today and contact us to clarify your doubts!