Key Aspects of Spanish VAT

Posted on Apr 24, 2025 in Economy

VAT Liability

VAT liability answers the question: Who is liable for the tax?

  1. As a general rule, the supplier making the delivery or billing for goods delivered is liable for the tax. The initial taxpayer bears the impact; the final consumer is never the taxable person. This rule applies to established suppliers.
  2. As a special rule for deliveries made by a person not established on Spanish territory, the taxpayer is the recipient business. This is known as the reverse charge mechanism, contrasting with the general rule. The recipient must issue a self-invoice stating the supplier’s identification and the transaction details to quantify the VAT.

VAT Tax Base

VAT is calculated on the price. The tax base is generally the consideration received for the supply or service from the recipient.

Components of the tax base include: the agreed price plus commissions, transportation, insurance, and subsidies per unit of output, but less special taxes (excluding VAT), allowances unrelated to the transaction, discounts, and reimbursable expenses paid on behalf of the client.

Reimbursable expenses are costs incurred by the supplier on behalf of the client, for example, travel costs paid on behalf of a client.

The tax administration cannot determine a different market value for the price paid, unlike in transfer tax.

VAT Tax Rates

The rate applicable is the one in force at the time of accrual. VAT has three rates: the standard rate (currently 21%), the reduced rate (currently 10%), and the super-reduced rate (currently 4%). Note the lack of progressivity in VAT rates.

Reduced Rate (10%)

The reduced rate applies to certain goods and services. For goods, this includes:

  1. Food products for human or animal consumption
  2. Certain agricultural goods like seeds and fertilizers
  3. Water supply
  4. Veterinary medicines
  5. Medical devices for human use
  6. Residential housing
  7. Plants

Services taxed at the reduced rate include:

  1. Passenger transport
  2. Hotel and restaurant services
  3. Agricultural services
  4. Public street cleaning
  5. Waste collection
  6. Cultural events, physical education, social assistance, and healthcare support
  7. Amateur sports events
  8. Trade shows
  9. Hairdressing services
  10. Construction work on residential housing

Super-Reduced Rate (4%)

The super-reduced rate applies to a limited list of goods and services:

  1. Certain basic food products
  2. Books, newspapers, and magazines
  3. Medicines for human use
  4. Vehicles for people with disabilities
  5. Publicly subsidized housing

VAT Accrual (Article 75)

Accrual answers the question: When does the tax liability arise?

For goods, accrual is generally at the time of supply. For services, it’s at the time of execution.

For continuous supplies or services (like leases), accrual occurs when the payment becomes due. For advance payments, accrual occurs when the payment is received.

The accrual for each transaction must be considered alongside the usual quarterly settlement period. The taxpayer must account for VAT payable even if the amount has not yet been collected. Payment in installments does not affect the time of accrual (unless it’s a continuous supply).