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You pay for it every day, every time you buy something or receive a service, from bread to a car.

We are talking about Value Added Tax (VAT).

 

VAT is an indirect tax levied on consumption1. In other words, it applies to anything you buy or any service you hire, with few exceptions.

 

How does VAT in Spain work?

Unlike other taxes, it does not take into account the taxpayer's assets or income to determine how much has to be paid. The percentage is applied depending on the good or service. There is no single VAT rate. Three different VAT rates coexist in Spain. The criterion for applying one or the other is established based on that product or service.

 

VAT is a percentage that is added to the base price of all products throughout the production chain, with the final consumer taking on the cost.

 

As an example, a TV that has a factory price of €500 will have to be added to 21% general VAT when buying it. The result is that its retail price will be €605.

 

What types of VAT are there in Spain?

Three different types of VAT coexist in Spain: the general, the reduced and the super-reduced. Let's see them.

 

General VAT

It is 21% that applies to most products and services. All transactions that do not fall within the reduced, super-reduced or exempt VAT are taxed on general VAT.

 

Reduced VAT

It is 10% and applies to operations that target certain categories of goods and services1.

This reduced rate applies to the following deliveries of goods:

  • Food, except alcoholic beverages, tobacco, soft drinks, juices and soft drinks with sugars and sweeteners.
  • Products used in agricultural, forestry or livestock activities, such as fertilizers or seeds.
  • Water, both for human or animal feed and for irrigation.
  • Sanitary equipment and materials.
  • The purchase of housing, including up to two parking spaces if purchased together.
  • Medicines for veterinary use.
  • Flowers and living plants.
  • Art objects, antiques and collectibles.

 

This reduced rate applies to the following services :

  • The transport of passengers and their luggage.
  • Hospitality, including accommodation and restaurants.
  • Services provided for agricultural, forestry and livestock farms
  • Urban cleaning.
  • Cultural events and shows (sports and non-sports).
  • Interpreters, artists, directors and technicians.
  • Trade fairs and exhibitions.
  • Social assistance.
  • Works and renovations in housing.
  • Rental with option to buy homes.

 

Super-reduced VAT

It is the lowest rate of VAT (applicable to what are considered basic goods and services).

The rate that applies is 4% and the list is very limited:

  • Basic products, such as bread, eggs, flour, milk, cheese, fruits, vegetables, vegetables, legumes, tubers and cereals.
  • Books, newspapers and magazines, as long as they do not contain only advertising.
  • School supplies.
  • Medicines for human use, medicinal substances and products that are used for obtaining them.
  • Vehicles for people with reduced mobility.
  • Housing of official protection, provided that their delivery is made by the developer, and homes acquired by entities dedicated to leasing.
  • Leases with option to purchase official protection homes.
  • Prostheses, orthoses and internal implants for people with disabilities.
  • Dependency services (telecare, home help, day and night center and residential care).

 

VAT-exempt products

The VAT Law establishes a series of products and services to which an exemption is applicable and therefore do not tax on VAT. These products and services are:

  • Insurance, capitalizations and reinsurance.
  • Postal services carried out by the universal postal service (mail, stamps and stamped effects).
  • Financial services (for example, cash deposits, loans and credits).
  • Social services (for example, educational and private lessons).
  • Medical and health services.
  • Certain sports and cultural services.
  • Some real estate operations (second and subsequent deliveries of buildings, delivery of rustic and non-buildable land or intended for public use).
  • Lotteries and gambling.

 

Whether in one way or another, VAT is and will be part of our daily lives, so it is better to know how it influences our economy.

I'm Spanish Adviser and you can ask me any question related to Spain. Our people speak 🇬🇧 🇺🇸 🇪🇸 🇩🇪 🇫🇷 🇺🇦 🇷🇺.

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