Does the economic activity of your business require operating with different countries inside Europe? Do you operate from Spain and sell goods to countries like France, Italy or the United Kingdom, or vice versa? Then, whatever the case is, you will need to register for your VAT Number in Spain. And this is not an easy job. Should you get your authorized tax ID in Spain or in another country? How does the VAT return exactly work? Well, you don’t need to worry. We will answer those questions and other relevant ones in this blog post!
WHAT IS THE VAT NUMBER?
The Value Added Tax number is an identification number that will enable you to do business and submit your invoices to companies inside Europe. This is the case for those individuals who, without having a physical office in Spain, would like to do any kind of economic activity with the country (like exporting goods). These are the non-resident companies.
Also, it is the number that those who are physically inside Spain will need in order to work or sell products with other European countries, such as exporting goods to them. This refers to the resident companies.
Bear in mind that, if you are inside a European country and do not hold a valid VAT number, doing business outside your country will imply important penalties. It’s simply illegal to do so. We are talking about another important tax, and complying with its dispositions is something essential.
WHAT IS THE DIFFERENCE BETWEEN THE VAT NUMBER AND THE NIF?
This is a mistake many people tend to do.
As both the VAT number and the NIF (“número de identificación fiscal) serve as basic identification numbers for companies, many tend to confuse them.
But they are not the same. Why? Because not all the companies and self-employed individuals who possess a NIF have a VAT number.
The geographical scope is completely different. On the one hand, the NIF enables you to operate within the national territory (Spain). On the other hand, if you would like to carry your activity within the whole European territory, requesting a VAT number will be compulsory.
HOW TO GET THE VAT NUMBER
The VAT is an identification number that you will need to request to the Spanish Tax Agency.
For that, you must clearly demonstrate to this institution that you really need this number. How to do it? That will depend on the autonomous community you are living in or where your company has its headquarters. There will be two cases in which the VAT number request will be denied. First of all, if you don’t really need it. But also if you fail to prove that you really will use it effectively.
Depending on that the requirements will be more or less strict.
There are cases in which the number will be conceded straightaway, without the need to do high efforts in demonstrating that you really need it. Nevertheless, there are regions in which an inspector will go to your office in order to check whether you actually need the number or not.
That is why you should only request it if you will really sell products to other European countries or provide your services there.
Once the Spanish Tax Agency has started with the procedure, they will request several documents that accredit your activities with other European countries. Here you can use invoices, budgets that you have been asked to submit or emails that show how a possible client is interested in your services.
From then on the institution has 15 days to issue its verdict. From the moment in which you get your application accepted you will be legally able to operate outside Europe. In the case that the application gets denied, you can opt to appeal to that decision.
If you need personalized assistance in obtaining your tax identification number, do not hesitate to send us an email at firstname.lastname@example.org
WHERE TO CHECK IF YOU HAVE OBTAINED YOUR VAT NUMBER
There is a special registry that shows information regarding a company and whether if it has a valid VAT number or not. This is really important if you urgently need a VAT in order to send an invoice. On the other hand, it is also really useful if you would like to check if the company you issue or receive an invoice from has an authorized VAT.
IN WHICH COUNTRY SHOULD YOU REGISTER FOR YOUR VAT?
The answer is really simple. You should register for your VAT identification number in those countries in which you operate from or from which you have your offices.
That means that, if for example you open a logistic center in Spain, just to receive your goods produced in the US but sold over Europe, you should register your VAT in Spain. It does not matter if you don’t have Spanish clients.
Nevertheless, there are several other situations in which you will also need a Spanish non-resident VAT number. Wich are those situations?
- If you would like to recover VAT paid in the Spanish territory.
- When you need to apply the reverse charge VAT. In the upcoming sections we will see what this is about.
- When your company provides telecommunication services in the Spanish country; or it installs technical equipment.
- To realize foreign trade operations, such as importing goods or holding them in the country until you deliver them to another EU state.
- When you would like to do one-time jobs like holding a conference or other types of events (which generate income).
ABOUT THE VAT TAX IN SPAIN
As you already know, the VAT is an indirect tax applied to the consumption of products and services. It is a tax that is found on the invoices of products and services, and paid by the buyer.
How much is the VAT in Spain? Well, that depends on the type:
- The super-reduced type, which is just 4%. This percentage applies to first-necessity products like bread, milk or books.
- For certain products and services, you have a reduced VAT, which is just 10%. It includes all the food products that are not included in the prior type.
- And, finally, the general VAT, which ranges from 8 to 21%. The broadest type. The cinema or theatre, gym, hairdresser or hotels would be included here. Mainly, we are talking about leisure products and services.
If you would like to know which are the exact rates for a concrete product or service you can do it here.
SHOULD YOU INCLUDE THE VAT TAX IN YOUR INVOICES?
This is a crucial question. Should you include this tax when billing your clients? Being for selling goods to them or for providing your services, in most cases yes, you should. Nevertheless, there are two exemptions in which you do not need to include it. Which are those?
- When the transaction takes place between two companies that are registered on the VAT VIES list. Furthermore, it is also really important that both firms are located in different countries inside Europe.
- When the reverse charge rule applies. This is, when the responsibility to account for the VAT tax transitions from the seller to the buyer. In that case, the tax payment gets canceled as the buyer declares both the VAT on the purchase and on the sale.
DOING YOUR VAT RETURNS
Once you get your authorized VAT number and start doing your economic activity, you will also need to do your VAT returns. This means accounting and declaring for all the VAT amounts that have been elicited in your transactions.
What should you include in the VAT return? A summary of all the transactions done and the VAT that has been charged in each of them. That, finally, will give you the net VAT due.
Another crucial question is the frequency in which you will need to do these returns. And that is something that depends on the specific country, as each of them is free to set its own period. In this sense, the most common reporting adopted by EU countries is the monthly format. Nevertheless, others opt for the quarterly, annual or even a reporting based on each activity realized (the most unfrequent of them all).
The deadlines for these returns are also set by each country.
DO YOU NEED A SPECIALIZED ACCOUNTANT MANAGE YOUR VAT RETURNS FOR YOU?
As you have seen, doing your VAT returns and everything related to this tax can be a bit overwhelming. Too many nuances and a long regulation you must entirely know in order to properly comply with the law. And that takes a lot of time.
That is why we don’t want you to worry about that. We want to be in charge of the boring VAT part, so you can focus on what you do best: running your business.
Then, if you would like to have an accountant with years and years of experience doing your VAT returns for you or even registering for the number, do not hesitate to ask us, we will be glad to manage your taxes!