Indirect tax snapshot
Please click on each section to expand further:
Value Added Tax (VAT) is the main type of indirect taxation in Spain and in other European Union (EU) countries. It is a tax on consumption which is applied on supplies of goods or services, intra-community acquisitions and imports.
VAT is ultimately borne by the consumer by being included in the price paid, although the responsibility for charging, collecting and paying it to the tax authority at each stage of the process rests, in general terms, with the business making the supply.
The supplier will charge VAT (output tax) on its sales, and incur VAT (input tax) on its purchases. The difference between the output tax and the deductible input tax in each accounting period will be the amount of VAT payable to the tax authority.
Where the input tax exceeds the output tax, a refund can be claimed.
A transaction is within the scope of Spanish VAT if the following conditions are met:
- it is a supply of goods or services
- it takes place within the Spanish territory
- it is made by a business or professional for valuable consideration, either regularly or occasionally
- it is made in the course or furtherance of any business carried on by that person or entity.
Any business that makes taxable transactions in Spain should be, generally, VAT registered in Spain.
There are three rates of VAT that are applied to goods and services in Spain; the standard rate, the reduced rate, and the super-reduced rate. In addition, some goods and services are exempted from the tax. Businesses that make exempt supplies are unable to claim all of the input tax that they incur, so the VAT paid to suppliers will be a ‘real’ cost. The most important exemptions are (although they restrict deduction of input VAT):
- medical and social services
- financial and insurance transactions
- educational and sport services
- lease of some kind of real
Most goods imported into Spain from outside the EU are subject to VAT. The tax will have to be paid by the importer at the time
of importation. There is an import deferral regime applicable under certain requirements. Where the importation is for business purposes and the importer is registered for VAT, it may be possible to reclaim the tax (subject to certain rules). It is also important to note the interaction between VAT and customs duty. Customs duty is levied across the EU at the place where goods are imported into the community.
It is levied in order to bring the cost of goods produced outside the EU up to the same level as those produced within it. Once duty (and VAT) has been paid by the importer, the goods are in ‘free circulation’ and they can then be released for use in the home market. Unlike other indirect taxes, such as VAT, once duty has been paid it is not usually recoverable by the importer. It therefore represents a bottom-line cost to the importing business if it cannot be passed on in higher prices.
It is therefore very important to ensure that the correct rate of duty is applied. VAT is charged on the value of the importation, including any custom duty.
Any business or professionals that make taxable supplies in Spain would have to register for VAT in Spain and submit periodic returns. In general, there is no threshold for VAT registration in Spain. If two or more entities form part of a group, all of them are established within Spain and are linked to each other by financial, economic and organisational orders, they could apply the special regime for group of entities. In this sense, it is deemed as group of entities the one formed by a parent company and its subsidiaries.
In this sense, it is considered a parent company the one meeting the following conditions:
- it has its own legal personality, also permanent establishments
- it has the control over the others through a direct or indirect participation of over 50% in the capital or voting rights of them and this participation remains during a calendar year
- it is not a subsidiary of any other entity established in Spain that could be also considered as a parent company in
A corporate body cannot be treated as a member of more than one VAT group at a time. The main advantage of being part of a VAT group is the offsetting of individual self-assessments of the entities within the group. The parent company shall make the payment or receive the refund of the aggregate balances.
However, each entity constituting the VAT group is jointly and severally liable for the VAT due by the VAT group. The option to apply the special regimen for group of entities is binding for three years (if the requirements continue to be met).
Regarding non-established businesses in Spain, a VAT registration limit does not exist. Foreign companies, not established for VAT purposes in Spain, that intend to make taxable supplies in Spain may need to register (this obligation may apply to businesses that supply goods or services deemed rendered in Spain). Registration for VAT in Spain may also be required where a non-established EU business is involved with distance selling.
Distance selling occurs when a taxable supplier in one EU country supplies and delivers goods to a customer in another EU country who is not liable to be registered for VAT, as private individuals. The common examples of distance sales are goods supplied by mail order and via internet.
Distance selling threshold is €10,000per calendar year, or the equivalent in its own currency. Distance sales from another EU country to non-taxable persons in Spain will be subject to VAT at the appropriate rate in the suppliers country. However, once the value of those distance sales to Spain exceeds the Spanish threshold:
- the supplier becomes liable to register for VAT in Spain
- Spain becomes the place of supply
- any further sales to customers in the Spain are subject to Spanish
Even if the threshold is not exceeded, the supplier can opt to waive the threshold rule. The option is binding for two calendar years.
Where these services are supplied to customers that are not businesses, the services will be taxed in the Member State in which the customer is established, has his permanent address or usually resides.
As a consequence, two optional special regimes are established (for suppliers outside and inside the EU). This will allow them to avoid being registered in each Member State in which the transactions are made.
In general terms, non-established businesses in Spain do need to appoint a fiscal representative and to inform the tax authority, before starting taxable transactions in Spain. This obligation will not apply to taxable persons established in other EU country.
VAT returns are normally prepared on a quarterly basis. They are due for submission within 20 days after the quarter end. For large taxpayers (revenue exceeding €6,010,121.04 in the preceding calendar year), for taxpayers that are included in the special registry for monthly VAT refunds and for VAT Groups, VAT returns must be filed for a monthly period. They are due for submission up to the 30th of the following month.
Annual summary returns must be submitted by 30 January of the following calendar year. Taxpayers that file monthly VAT returns do not submit Annual summary return.
If a VAT return is not submitted on time or the related tax is not paid by the due date, the tax authority may impose penalties or surcharges to the taxpayer. Late submission or payments without a request from the tax authority are subject to a surcharge of 1% per month plus another additional 1% for each full month of delay with which the return is filed with respect to the term established for filing and payment.
When the payment is made after 12 months of the deadline a surcharge of 15% plus delay interest is applicable. Late submission or payments after a request from the tax authority are subject to fines of between 50 and 150%, plus interest.
However, if the penalty is not disputed by the taxpayer and the payment of the penalty is made within the deadline, a 25% reduction of the penalty applies.
Businesses that make supplies or acquisitions of goods or services to traders registered for VAT in other EU countries are required to submit the recapitulative statement of intra-community operations. This statement will have to be submitted on monthly basis. However, if the volume of Intra-community supplies of goods does not exceed €50,000, the statement will have to be submitted on quarterly basis.
This statement could be also submitted annually in certain circumstances.
In addition, if the value of the intra-EU trade in goods dispatched or arriving from other EU country is above an annual threshold (€400,000 as from 2015), Intrastat declaration has to be submitted for either or both. These declarations have to be submitted on a monthly basis.
Yes. Penalties could be imposed where businesses do not comply with the VAT rules. Penalties can be applied for errors and omissions made on tax returns, or where the tax is paid late. Penalties can also be applied where the business has failed to maintain adequate records, provide information (including in requests from the tax authority) or when a VAT refund is claimed improperly. Criminal proceedings may be brought in the case of more serious matters.
Yes, it may be possible to reclaim the VAT incurred in certain circumstances. Two schemes exist, one for businesses established in the EU and another for businesses established elsewhere.
The EU cross border refund scheme is available in all EU member states, and enables a business established in an EU country to recover VAT incurred in another member State. To be eligible to make a claim, the claimant must be a taxable person established in an EU member State other than the one from which the claim is to be sought. In addition, the claimant:
- must not be registered, liable, or eligible to be registered in the member state from which he is claiming the refund
- must have no fixed establishment, seat of economic activity, place of business or other residence there involved in the supply of goods or services performed during the period covered by the claim
- during the refund period he must not have supplied any goods or services in the member State of refund, apart from certain limited
The amount that is refundable is determined by the deduction rules that apply in the country making the refund. The claim is submitted electronically to the tax authority from whom the repayment is being sought. The refund period must cover a quarter or a calendar year – or a shorter period where it represents the reminder of a calendar year. The claim has to be made by 30 September of the year following that in which the VAT was incurred.
Businesses established outside of the EU can, subject to certain conditions, also reclaim the VAT incurred on imports into Spain or purchases of goods and services where Spanish VAT has been charged. The scheme is available to any person carrying on a business established outside the EU, provided that in the period of the claim:
- they were not registered or liable to be registered for VAT in Spain
- they were not established in any EU country
- they made no supplies of goods and services in Spain other than certain specified exceptions
- they are not the addresser of supplies of goods and services where reverse charge is applicable
- they comply with the requirements and limitations for deducting VAT
- they are established in a third country that provides reciprocal arrangements for refunds to be made to taxable persons established in Spain has arranged reciprocal agreements with Canada, Israel, Japan, Monaco, Norway, UKand Switzerland; this agreements states specific operations in which VAT could be claimed back
- as of the 1st January 2015, reciprocal agreements are not required for claiming the VAT borne on the imports or acquisitions of the following goods or services:
- Molds and equipment to be used for fabricating goods to be exported to the non-established business or professional or destroyed
- Access to services, hotels, restaurants and transport linked to the attendance to fairs, conferences and exhibitions of commercial or professional
The claim is also submitted electronically and must cover a quarter or a calendar year – or a shorter period where it represents the reminder of a calendar year. The claim has to be made by 30 September of the year following that in which the VAT was incurred.
A VAT invoice must show:
- an invoice number which is unique and sequential
- the seller’s name and address
- the seller’s VAT registration number
- the invoice date
- the time of supply (also known as tax point) if this is different from the invoice date
- the customer’s name and address
- a description sufficient to identify the goods or services supplied to the customer
- VAT rate applied
- the total amount of VAT charged expressed in
For each different type of item listed on the invoice, it must be shown separately its corresponding taxable base. Where a VAT invoice includes exempt goods or services, it must specifically state the applicable articles of the Spanish legislation or the EU Directive, or a mention of that the operation is exempt.
Where a VAT invoice includes certain operations as those where reverse charge rule applies, special regime for travel agencies or special regime for artworks, this must be mentioned on the invoices.
Where a business makes sales of goods or services not exceeding €400, a simplified VAT invoice can be issued. Simplified VAT invoices could be also issued in certain operations where the value does not exceed €3,000. VAT invoices can be issued, received and stored in electronic format.
Electronic invoices must contain the same information as paper invoices. The method used to ensure the authenticity of origin, the integrity of content and legibility of the invoices is a business choice and can be achieved by any business controls which create a reliable audit trail between an invoice and a supply of goods or services.
Businesses that file monthly VAT returns and taxpayers that voluntarily opt in for the Immediate Supply of Information on VAT(ISI) have to prepare the VAT Books through the tax authorities electronic portal. The ISI obliges companies to provide the information about the invoices issued and received within 4 days after their issuance or booking, respectively.
Companies must send the tax authorities invoicing details electronically, using web services based on exchanging XML messages.
For further information on indirect tax in Spain please contact:
Cristina García Castro