Every year, entrepreneurs and freelancers are faced with paying taxes. Last January 1, the new state budget came into force, which means an increase in the rate of payment. In the following article, you will find the updates in the VAT rates in Spain and how much you have to pay. See which one applies to your activity.
What is VAT?
VAT, or Value Added Tax, is an indirect tax payable on the purchase of a good or service.
VAT rates in Spain
Depending on the country you are in, the VAT rate may change. Since the reform of the VAT law in 2010, there are 3 types of value added tax in Spain:
This is the VAT rate applied to almost all products and services. Since 2012, the rate set is a standard 21%, previously 18%.
Some of the products included are clothing, footwear, cars, household appliances, hygiene, cosmetics, and services such as energy supply and internet.
In 2021, sugar-sweetened and sweetened beverages have been included in this general rate.
The reduced rate offers tax treatment to products and services of basic necessity or basic consumption. The applicable rate is 10% and includes:
Water (for human or animal food or irrigation)
Medicines for veterinary use
Medications, equipment and accessories to help with health impairments or conditions such as eyeglasses, sanitary napkins, personal hygiene products or contraceptives.
Human nutrition products (non-essential) or veterinary products.
Agricultural, forestry or livestock products such as seeds, fertilizers, insecticides, herbicides, etc.
The dwellings, including parking spaces and annexes.
Public transportation service.
Hotel, camping, spa and restaurant services.
Public road cleaning services.
Health care such as ophthalmologic, dental and thermal cures.
The execution of renovation and repair works carried out on dwellings.
Leases with purchase option.
Since 2018, entertainment and leisure services such as sports, cinema, library, theater, museums, circuses, amusement parks, as well as music concerts are also included.
Super Reduced VAT
The super-reduced VAT has a rate of 4% that applies to goods and services of basic necessity and basic consumption:
Essential foods (bread, flour, fruits, fruits, vegetables, vegetables, eggs, cheese, milk, legumes, cereals, tubers).
Books, newspapers and magazines without advertising.
Vehicles intended for persons with reduced mobility.
Prostheses, orthoses and internal implants.
Government subsidized housing.
Telecare services, home help, centers and residential care.
VAT comparison table
To make it easier for you to understand, we have prepared a table with the VAT rates in Spain and their applications.
IGIC in the Canary Islands
Although it is within Spanish territory, the Canary Islands do not apply everything we have seen above. This is because the autonomous community has created its own type of tax called IGIC or more specifically Impuesto General Indirecto Canario (Canary Islands General Indirect Tax).
This tax works the same as VAT and adds a value of 7% to all transactions such as imports of goods. Although service contracts made with clients outside the islands would be exempt from VAT.
VAT developments in 2022
Since mid-2021, several changes to the VAT law have come into force. The most notable is the new VAT for online sales that affects different areas:
Businesses invoicing more than 10,000 euros for sales to consumers in other EU countries will be obliged to invoice at the VAT rate applicable in the consumer’s country.
Marketplaces are starting to be considered as sellers for VAT purposes and will have to manage it when the company using their services is not established in the European Union and imports goods from outside the European Union.
Imports of purchases over EUR 150 from a non-EU country are subject to the tax rate of the Member State of destination.
Another novelty of the VAT is the increase of applications in the purchase of sugar-sweetened beverages from reduced to general.
Further changes are expected with the reform of the EU VAT directive, as well as the publication in March of the Brussels regulation and the deadline for the elimination of reduced rates and current VAT exemptions for environmentally harmful goods and services.
You may also be interested in: Deferred payment of VAT for self-employed entrepreneurs and SMEs in Spain
Extraordinary measures in VAT due to the pandemic
On the other hand, and as another novelty, there are the extraordinary measures due to the pandemic.
Each government has taken different measures to combat COVID-19 and Spain has been no exception, with the Tax Agency considering lowering VAT rates for prevention and treatment.
These are the transactions affected with a decrease to the 0% VAT rate in relation to the pandemic:
Deliveries, imports and intra-community acquisitions of sanitary material to combat COVID-19, acquired by hospitals, public entities, non-profit organizations or private entities of a social nature.
Acquisitions of medical devices for COVID-19 diagnosis and COVID-19 vaccines authorized by the European Union when the recipients are public law entities, clinics or hospitals, or private social entities.
Transport, storage and distribution of medical devices for diagnosis and prevention of COVID-19.
You may also be interested in: What is an intra-community VAT number?
In spite of everything, Spain remains within the European average and is in 19th position with a figure of 8.8% of what is paid for VAT, according to European Commission indicators. Remaining as a pending point due to the tax burden of EU member countries.
If you are new in the country and do not know how to make your quarterly VAT return, do not hesitate to contact one of our advisors through the TAS Consultancy contact page or through +34 93 737 75 25 or by email: firstname.lastname@example.org.