The tax declaration is one of the fiscal obligations that affects all consumers in Spain, and today we come to tell you about the case of Value Added Tax. Do you know which activities are exempt from VAT? Read on and find out about them in this article!

VAT exempt vs. non-taxable activities

You have probably heard about the existence of activities exempt from VAT and others considered not subject to VAT, and although in both situations the payment of the tax should not proceed, below, we clarify the difference between the two concepts:

Activities not subject to VAT

A product or service is not subject to VAT when VAT is not applicable to the transaction being carried out.

But, what does this mean? For example, in the case of the sale of a car between private individuals, the transaction is not subject to VAT, but if the sale is made by a businessman, it would not be subject to VAT, although he must pay the Transfer Tax.

VAT exempt activities

On the other hand, an activity will be exempt from VAT in those cases in which the operation is subject to VAT, but the tax regulations exempt it from payment, whether for cultural, social or other reasons.

In addition, it should be noted that although companies cannot charge VAT on their invoices, they must bear it on the purchase of the products in order to market the exempt product.

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Which activities are exempt from VAT?

According to Law 37/1992 of December 28, 1992 on Value Added Tax, there are a number of activities that are exempt from paying this tax.

In general, most of the activities that fall into this category are carried out in the fields of health, education, public or cultural organizations. Each case is described in detail below:

Education and training

All training services, public or private training centers or private lessons are included in the VAT exemption.

The truth is that the requirement for this to occur is that these entities must be authorized by the State, the Autonomous Communities and other authorized bodies.

In this way, if you are in the teaching business and you carry out activities such as early childhood education, university, postgraduate, language programs, professional training and recycling, child care, among others, you will not be obliged to invoice taxes to your clients.

On the other hand, there are at least three exceptions to the rule in which VAT must be applied. These activities are:

• Distance learning courses with delivery of audiovisual material or books

• After-school courses taken at another company or educational institution

• Driving school or licensing center courses

Health care

All medical and health care services, both from public and private entities, are included, as long as they are included in the authorized price system.

With respect to exceptions, we highlight the following cases that apply:

• Cosmetic surgery operations

• Acupuncture

• Naturopathy

• Mesotherapy

• Digitopuncture

• Veterinary Services

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Social, cultural and sports activities

Those social assistance services provided by public law entities or private entities of a social nature are included.

In this type of activities, it is an indispensable requirement that the association is not-for-profit and that the representatives exercise their position free of charge, in order to be able to enjoy the VAT exemption.

Among the most recognized activities that can be applied are:

• Activities related to children and youth such as rehabilitation, guardianship and care of children

• Assistance to the elderly, ethnic minorities, refugees, asylum seekers or homeless persons

• Special education programs or assistance to handicapped persons

• Social, community and family actions

• Social reintegration and delinquency prevention

Artistic services

This type of activities includes services performed by professionals such as writers, plastic artists, draftsmen, and those who are subject to copyright.

In addition, journalistic collaborations with printed and periodical media are exempt from VAT.

Real Estate Services

With respect to leases of dwellings, deliveries of rural and non-buildable land, or in the case of subsequent deliveries of buildings, they are exempt from VAT.

Financial and insurance operations

This section includes those operations related to services engaged in the provision of insurance and capitalization, as well as mediation services that carry out financial operations such as cash deposits, credits or loans.

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Invoicing exempt from VAT

Now, you may be wondering what happens at the moment of issuing my invoice? If you are carrying out any of the activities mentioned above, you must issue an invoice, except that it must specify that it is exempt from VAT, thus complying with Article 20 of the Value Added Tax Law.

Similarly, in the case of self-employed persons whose activity is exempt from VAT, they will not be obliged to file the quarterly VAT return form 303, nor annually, in form 390, with the Tax Agency.

However, it is one thing not to deduct the input VAT in the aforementioned forms, and another to deduct the total expense in the IRPF, through form 130, which will be required.

Having a business implies a huge responsibility, and among them, dealing with taxes is an aspect that we cannot forget. Now that you know which activities are exempt from VAT, we hope it will be of help to you when doing your paperwork. And, if you still have any doubts, click here and contact our tax experts!