VAT in Spain
Spanish VAT Rates
Value Added Tax in local language is "Impuesto sobre el Valor Añadido". The Spanish VAT rates are as follows:
- Standard rate: 21%
- Reduced rates: 10% and 4%
Spain has opted for the reduced and super-reduced VAT rates on a number of items allowed by the VAT Directive (source: European Commission)
Vat Tax Spain
Pharmaceutical products (feminine products are taxed at 4% rate)10% and 21%*
Medical equipment for disabled persons10%*
Children's car seats21%
Books and E-Books21%*
Books on other physical means of support4%*
Admission to cultural services (theater, etc)10%
Pay TV / cable21%
Writers / composers10% and 21%
Restaurant and catering services10%
Admission to sporting events10% and 21%
Medical and dental care21%
Shoes and leather goods21%
Clothing and household linen21%
*Super-reduced rate of 4% applies on certain foodstuff items, certain pharmaceutical products, books and certain newspaper and social services."
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Spanish VAT Deduction limits
The right to deduct input VAT generally follows the rules on deduction of Corporate Tax. Expenses need to be incurred for business purposes. In practice, the below items are generally deducted at the following rates:
- Input VAT on hotel accommodation or restaurant meals is 100% deductible provided the invoice is issued to the company and the expense is incurred for business purposes.
- Input VAT on conferences, fairs and exhibitions is normally 100% deductible.
- Business gifts are 0% deductible unless for promotion samples or low value gifts (less than 200€ per year)
- Car rental, car repair and fuel expenses are 50% deductible where the expenses is connected to both, business and personal purposes. If wholly and entirely for business purposes, then VAT can be deducted at 100%.
- Taxi, train and other transport expenses are 100% deductible provided an invoice or simplified invoice is issued.
- Entertainment expenses are generally 0% deductible.
Deducting VAT before starting your actvities is only allowed under certain conditions. The expenses incurred should be connected to the expected business, there should be a short period between the expense and the start of the business and all accounting and tax obligations must be met.
Spanish statute of limitations
Input VAT should be claimed in a VAT return filed no later than the end of the fourth year following the year during which the deductible VAT fell due.
Regarding the obligation to pay VAT, the Spanish authorities have four years and 11 months to claim output VAT from the first quarter VAT return; four years and seven months for the second quarter; four years and four months for the third quarter and four years for the fourth quarter.
Spanish tax point rules
The tax point is the time when VAT becomes due. VAT due should be distinguished from VAT payable. VAT is due when the tax point occurs. VAT is payable between the day after the end of the reporting period and the due date to submit and pay the VAT return.
In Spain, the following tax point rules apply:
- General rule: Tax point arises when the goods are placed at the disposal of the customer or when the services are completed. For services connected to a supply of goods, the same tax point rules as for the supply of goods apply. In general, an invoice must be issued when the tax point occurs.
- Prepayments or advanced payments create a tax point. In these cases, VAT is due when the prepayment is made.
- Intra-Community acquisitions: Tax point occurs when the goods are placed at the disposal of the customer. An invoice must be issued by the 16th day of the following month. In these cases, a prepayment would not bring the tax point forward. Also, tax point occurs at the issuance of the invoice, when the invoice documenting the supply is issued prior to the commencement of the dispatch/transport.
- Intra-Community supplies: The tax point is the 15th day of the month following the dispatch of the goods or the date of the issuance of the invoice, whichever happens earlier. For example, if goods are dispatched the 12nd of February and an invoice was not issued, the tax point is the 15th of March.
- Import: Tax point occurs when the goods are imported according to the relevant import documents.