VAT in Spain – brief introduction

VAT in Spain

VAT or value-added tax is one of the types of sales tax – it is present in nearly all countries except a handful of exceptions. Even these few use some sort of VAT-like measures, which led to a situation where all entrepreneurs are familiar with these issues to a certain degree. Especially when activities spread to multiple countries, the laws involved become more and more complex leading to massive confusion – this is where VAT compliance services come into play. They offer to settle the issues using their familiarity with VAT system in respective countries. But before deciding to make use of their services it is imperative to become more familiar with the topic especially when considering business activities in foreign countries. In this article we will take a brief look at the VAT in Spain.

Spanish VAT – basics

In Spain VAT rules are administered by a tax agency called Agencia de Administración Tributaria. For any non-resident company it usually means getting Spanish VAT number and going through Spanish vat registration procedures. Since 1st of July 2021, if your turnover exceeds 10000 EUR within borders of EU, what awaits you is a tax liability in all countries you are selling to – commonly known as VAT threshold and procedures following that will require applying for VAT number in each of these.

Spanish VAT number

In Spain VAT number is called Número de Identificación Fiscal or NIF in short and acquiring it is relatively simple – it requires applying for it in Spanish Tax Office, which will require aid of local representative. Even if entrepreneur would find a way to do it without one, Spanish VAT law still requires a local fiscal representative so getting one early might save a lot of trouble. Beware as the procedures do take some time so doing it early might be a wise choice.

NIF – format and where to check it?

NIF can be seen in different formats composing of 11 characters, beginning with country code – ES in this case and the 9 digits with 1-2 letters appearing forming 3 distinct forms: X11111111, X1111111X and 11111111X (X stands for letters while 1 for numerals). European Union has made the process of verifying the VATIN (VAT identification number) very simple – at least for companies with numbers registered within member countries of EU, it can be done with ease through use of VIES. One could say that development of social services went so far that it even impacted Tax Authorities. Checking the tax code has never been easier.

VAT registration – what after?

What do we have to do to pay VAT in Spain? We start by having our VAT registered, following which we receive our Spanish VATIN. By now we should have a local fiscal representative deal with Spanish authorities – it is not difficult to find a Spanish company involved in VAT compliance to perform that troublesome paperwork for you. And that should come as no surprise considering Spanish Tax Law requires non-resident entrepreneurs to have a local qualified individual as their representative.

Spanish VAT rates

Spanish Tax Authorities established 4 different VAT rates –standard, two reduced VAT rates and VAT exemption category. Without going into detail, there are some examples of each:

  • VAT exempt: education services (with proper officially recognized syllabus) or services provided by professionals such as medical services and so on
  • 4%- Super reduced rate: Basic food and medicine for human use
  • 10% – Reduced rate: Hotel accommodation, medicine for pets and public transport
  • 21% – Standard VAT rate: the most common taxable services such as internet connection, water and energy, fuel, cosmetics and so on.

Listed examples are not all that belong to each category, there are many, many more examples so make sure you have assigned your products to appropriate group to charge VAT correctly. For the detailed information it is recommended to check the official webpage of Spanish Tax Agency. For these interested in special examples of VAT exemption it is recommended to familiarize yourself with VAT directive.

Spanish VAT – time issues

As far as VAT is involved our main concern is the tax point. Reporting period for VAT returns differs depending on your sales. Annually it is obligatory for all and deadline is 30th of January of the following year. Monthly or quarterly basis depends on whether you have crossed the threshold of 6m EUR of annual revenue in the previous year. Above that you are automatically assigned to the monthly vat return category, but it is also possible to register for the Monthly Refund Scheme when not fulfilling that condition. For monthly VAT return the deadline is the 30th, while quarterly falls on the 20th of the following period.

Special case

When thinking of VAT, trading with residents of non-EU countries is a thing that comes to mind. Such individuals may claim VAT return upon return to their country. It is important to remember that it is only possible to make such claim on VAT paid for goods that were taken to the country of residence.