Sales tax in Spain: VAT Tax and VAT Rates

One of the taxes you will most frequently pay in Spain is the sales tax, called VAT (or IVA in Spanish). In this article you will learn everything you need to know about it. From which is its exact percentage (something that changes according to the product or service you buy), how to avoid paying it if you are visiting the country, and how it will affect you as a freelancer. So if you want to fully understand how one of the main taxes in the country works, keep on reading!

What is IVA or VAT tax in Spain?

 

In Spain, there is a sales tax that is called “IVA” or VAT (in Spanish “Impuesto sobre el Valor Añadido), a tax applied on retail sales or services provided by professionals.

Basically, the vast majority of purchases (big and small) you make on a day-to-day basis are taxed with this sales or VAT tax.

That is why it is an indirect tax levied on consumption, and it is completely independent of your income level (as opposed to income tax).

Currently, the general sales tax or IVA rate in Spain is 21%. Nevertheless, as we will see below, there are lower types for certain products and services, reducing the amount payable immensely.

 

Spain VAT Rates

 

The general rule of 21% does not always apply. There are 3 different brackets or percentages for the IVA rate in Spain. The applied bracket depends on the product or service:

 

Standard

 

Since 2012, the standard IVA rate in Spain has been 21% (it was previously set at 18%).

This percentage level is applied to all the taxable goods and services that are not included in the following sections, which basically include:

• Water and energy supplies
• Clothes and shoes
• Cars, motorcycles and its fuel
• Hygiene products and cosmetics
• Home appliances
• Internet connection

 

Reduced

 

Then we have the reduced 10% IVA rate in Spain.

This rate applies to:

• Hotels and restaurants
• Entertainment and leisure options (like the theater, cinema, amusement parks, or concerts)
• Sports
• Public transport
• Plants and flowers
• Property purchases if the building is newly built, including parking slots.
• Non-essential food supplies
• Medicines for your pets
• Equipment and accessories destined for health deficiencies, like contact lenses or glasses.

 

Super-reduced

 

The super-reduced IVA rate in Spain is equivalent to just 4%, and is applicable to basic necessities.

In that sense, it applies to:

• Basic food (like eggs, milk, bread, fruits, vegetables, cereal, flour) and water
• Medicines for human use
• Reading material such as magazines, books, or newspapers
• Social housing
• School supplies

 

Zero (VAT-exempt)

 

And, finally, the services and products that are VAT-exempt. This means they do not have to pay IVA in Spain. 

That is the case of some services provided by registered professionals, like medical services provided by dentists, doctors, or opticians.

But also different types of education and learning courses. But not all of them are VAT-exempt, just courses regulated with a proper syllabus.

 

What is IGIC in the Canary Islands?

 

Even though also in Spain, everything we have covered so far does not apply to the Canary Islands.

That is because they have a special type of sales tax, called IGIC (Impuesto General Indirecto Canario), and do not use VAT.

But it works exactly the same.

Instead of VAT, all the transactions within the Islands, as well as imports of goods, are charged with a 7% IGIC.

But what happens if a professional from Lanzarote, for example, does business with mainland Spain? That operation would be exempt from VAT.

 

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Spain VAT Refund For Visitors

 

If you are a foreigner who is visiting Spain and are a non-EU citizen, good news.

You will have the option to get a refund for the VAT tax paid in certain stores.

As long as the purchase at any specific store is higher than €90 and that it took place in any of the shops that offer this tax-free regime (check for that sign before entering), you will be able to claim your sales tax money back.

How?

Basically, you will need to collect all the receipts and invoices for your purchases and go to any IVA refund station to submit those together with all the items you bought.

You can find those stations at the airport once you are leaving the country (go to the customs desk), in international travel hubs, and in tourist offices.

With that, an inspector will give you a document or form that will be stamped, a form that you will need to drop in any mailbox before leaving the country.

But since 2019, the Spanish Tax Agency developed an online system called DIVA with which you can easily get your invoices stamped digitally. You can learn more here.

After approximately 60 days, you will get your VAT refund through your credit card.

Nevertheless, bear in mind that certain expenditures can’t be regarded as VAT-free, and there may be a limit in the percentage to be refunded according to the specific region you are visiting.

 

VAT when buying products to other EU countries

 

What happens if you buy any product to, for example, France or Germany, and receive them in Spain (the most typical case would be when using Amazon)?

In that case, and as long as you have an International VAT number, you can request a sales tax exemption.

This number is called ROI, and you can find all the information in this article in which we explain all the details.

 

Sales tax if you are providing services in Spain as a freelance

 

And, finally, one of the more typical questions if you are a self-employed individual in Spain. 

Because IVA in Spain is one of the main taxes you will end up paying as a freelancer.

In all your invoices, you will have to add an extra 21% as IVA tax for all the services provided. 

But that is not an amount you will earn, even though many freelancers use that income as an auto-financing mechanism.

At the end of each quarter (on March, June, September, and December) you will need to declare and pay to the Spanish Tax Agency that amount you have been collecting for the past 3 months. 

That means that you will just work as an intermediary: collecting the corresponding VAT from your clients on behalf of the administration, but then paying it to the Spanish Hacienda.

Do you have any questions about IVA tax in Spain? Our tax lawyers will analyze your situation and see how to best approach your situation. 

 

Book a consultation with one of our lawyers and we’ll answer all your questions: