Understanding Taxes and Commercial Documentation in Spain

Posted on Jan 10, 2025 in Business Administration and Management (BAM)

Taxes in Spain: An Overview

Direct Taxes

These impose a tax burden to pay an additional amount for the state.

  • Income Tax: Income tax for individuals and legal entities.

Indirect Taxes

These affect consumption or expenditure.

What are they?

  • IGIC (Canary Islands Indirect General Tax): Applied in the Canary Islands.
  • Types:
    • General: 5%
    • Reduced: 2%
    • Other: 0%
    • Increased: 9% and 13%
  • IPSI (Tax on Production, Services, and Imports): Applied in Ceuta and Melilla.
  • VAT (Value Added Tax): Applied in Spain, the EU, and other countries.

On what does it apply?

On consumption, and it is taxed in the manner provided by law and the conditions of sale and provision of goods and services performed by businessmen or professionals.

What are the tax-exempt sports activities?

  • Hospitalization and healthcare services.
  • Assistance to individuals by medical and healthcare professionals.
  • Services performed by dentists and dental technicians, including delivery, repair, and placement of dental prostheses.
  • Other: Free blood donation, transport of the ill by ambulance, education, and welfare.

VAT in Aesthetic Treatments

7% is applied.

Exempt if the treatment is for a disease (e.g., sequelae of severe burns on the face).

VAT Types

  • General – 16%: Majority of professionals and goods/services (delivery, clothing, cars, furniture, computers, alcoholic beverages).
  • Reduced – 7%: Medical products and supplies, water and food, transportation of people, catering services.
  • Super Reduced – 4%: Medicines, essential food, books, and journals.

Tax Concepts

  • Tax Base: Total value of the acquired product or service on which VAT is applied.
  • Taxable income = cost of the product or service + expenses, discounts, or bonuses.
  • Tax Rate: Percentage of tax applied to the taxable amount.
  • Amount of VAT: What is paid in VAT.
  • Amount of VAT = tax base x tax rate.
  • Amount to Pay: The amount of the tax base plus the VAT.

Commercial Documentation

Other Names

Commercial documentation or documentation of sales operations.

Why is it Needed?

  1. To keep a written record of the commercial operation performed, including the most relevant details. It is essential for management.
  2. It can have legal value.

Business Cycle

Stages

  • The healthcare professional is a business client.
  • The professional provides services to a client.

What Data Should it Contain (General)?

  1. Document name and number.
  2. Identification of who issued the document.
  3. Identification of the client.
  4. Location and date.
  5. Signature or seal of the issuer.
  6. Each document has specific content according to its function.

Basic Identification Data

  • Individuals: Name, address, and VAT number.
  • Organizations or Companies: Company name, business name, NIF.
  • Others: Title, professional association number, telephone number, email address, or web page.

Tax Identification Systems in Spain

Assigned by the General State Administration.

Individuals

  • Tax Identification Number (NIF): Obtained by adding a capital letter to the citizen’s document number.
  • Foreigner Identification Number (NIE): For non-Spanish residents.

Legal Entities

  • Tax Identification Code (CIF) – 9 characters:
    • The first character is a capital letter indicating the legal form of the entity.
    • The next 7 are numerical indicators. The first 2 are provincial, the other 5 are sequential.
    • The last one can be a number or a letter.
  • Tax Identification Number (NIF) – 9 characters:
    • The first character is a capital letter.
    • 7 random digits.
    • The final character is a control character.