Country Guide - VAT in Spain

VAT in Spain - Three Types of Rates

There are three types of VAT rates in Spain:

1. Standard VAT rate,

2. Reduced VAT rates,

3. Zero VAT rate.

How much is VAT in Spain Regions?

Certain regions, such as the Canary Islands, Ceuta, and Melilla, fall outside the VAT zone, meaning their residents and businesses are not subject to VAT and do not apply the VAT rate Spain.

However, the Canary Islands General Indirect Tax, or IGIC, applies instead of VAT in the Canary Islands. The standard IGIC rate is 7%, with additional rates of 0%, 3%, 9.5%, 15%, and 20% applicable to tobacco products.

In Ceuta and Melilla, the Tax on Production, Services, and Imports (Impuesto sobre la Producción, los Servicios y la Importación) or IPSI is applied instead of VAT. It is set according to minimum and maximum limits ranging from 0.5% to 10%.

VAT Registration Threshold

The VAT legislation provides essential details regarding the VAT threshold in Spain, as well as the relevant provisions that apply. Additionally, consulting with Tax Authority officials can be a helpful resource for interpreting the information provided. 

There is no VAT registration threshold for resident businesses in Spain, and non-resident businesses are exempt from a registration threshold. 

The EU-wide harmonized threshold for intra-EU distance sales of goods and B2C services is set at EUR 10,000. There is no registration threshold for non-EU established suppliers of electronically supplied services.

Starting January 1, 2025, the special EU VAT scheme for small and medium-sized enterprises (SMEs), referred to as the EU SME scheme, enables SMEs engaged in cross-border trade to sell goods and services without applying VAT to their customers, provided their total annual turnover across all EU countries does not exceed EUR 100,000. Furthermore, taxable persons must remain below their domestic small business VAT exemption threshold, which under EU-wide rules cannot exceed EUR 85,000. 

Types of Taxable Activities in Spain

Economic operators' goods and services provided in Spain for a fee as part of their regular business activities are subject to VAT. From a VAT standpoint, these operators are considered taxable and are required to register for tax. This includes individuals conducting professional activities, legal entities, and organizations without legal status.

Taxable activities that trigger VAT Spain include the supply of goods and services in Spain for a fee, the importation of goods, the intra-EU acquisition of goods for payment, and the export of goods to non-EU countries. Additionally, there are other scenarios where both domestic and foreign businesses should apply Spanish VAT to their transactions.

VAT Registration Process

Spanish VAT Registration for Domestic Businesses

Businesses should register for VAT with the State Tax Agency within 30 days of commencing operations or before conducting their first taxable transaction, whichever occurs first. Voluntary VAT registration is typically unavailable in Spain, as all individuals or entities involved in taxable transactions are required to register for Spain VAT.

The assignment of a VAT Spain number, with certain exceptions, applies to the specific groups of individuals and legal entiries, including professionals and businesses, whether based within or outside the Spanish VAT area, who engage in intra-EU supplies of goods or acquisitions of goods subject to VAT, regardless of whether these intra-EU acquisitions are used for business or professional activities outside Spain. 

The same applies to professionals and businesses established within the Spanish VAT area who receive services from professionals or businesses not based there, for which they are considered taxable persons under VAT. This is commonly referred to as a reverse charge mechanism.

Furthermore, professionals and businesses established within the Spanish VAT area who offer services deemed to be provided in another EU country according to the location rules when the recipient of these services is the taxpayer, and legal entities not engaged in business or professional activities but who make intra-EU acquisitions of goods subject to VAT, are subject to the same rules.

Spanish VAT Registration for Foreign Businesses 

The same rules apply to domestic and foreign businesses, meaning that foreign businesses should register for VAT in Spain as soon as they make a taxable supply.

To obtain a VAT ID, foreign businesses should prepare several documents beforehand to avoid delays in the application process. The list of required documents includes a notarized and Apostilled Power of Attorney (PoA) from the local representative in Spain, translated into Spanish, and an official extract from the businesses' national trade register, notarized, Apostilled, and translated into Spanish. The passport should also be notarized, Apostilled, and officially translated into Spanish for sole traders.

VAT Returns in Spain 

According to the Spanish VAT Regulation, most registered taxpayers, except for large taxpayers, are generally required to file their VAT Spain returns every quarter. The deadline for these quarterly returns is typically the 20th day of the month following the end of the reporting period. However, the return for the year's final quarter has a different deadline: January 30th of the following year.

If a business's Spanish revenue exceeds EUR 6 million in the previous calendar year or if the business applies for the Monthly Refund Scheme, it is required to file VAT returns on a monthly basis. For taxpayers who are required to file monthly, the deadline is the 30th day after the end of the reporting period, with an extension to the last day of February for the January reporting period. 

Regardless of the filing frequency, the applicable form for submission is Form 303. 

Penalties for Failure to File Tax Return

Taxpayers who file their VAT returns after the deadline may incur higher costs than those who submit the return on time. The Tax Authority may impose fines if taxpayers fail to comply with VAT regulations in Spain.

The additional costs, amount, and processing method depend mainly on whether the return was filed late without a prior request from the Tax Agency or after an explicit request from the Tax Authority.

Filing a late return without a prior request will result in a mandatory surcharge, which varies based on the duration of the delay.

If the responsible Tax Authority notifies the taxpayer to pay his debts to the Treasury, penalties can range from 50% to 150% of the VAT owed, with potential reductions in specific cases. The severity of the penalty depends on factors such as the amount of VAT owed and the nature of the infraction.

VAT Rules for Electronically Supplied Services 

The EU VAT Directive 2006/112/EC defines Electronically Supplied Services (ESS) as services delivered via the Internet or other electronic means. These services are typically automated with little to no manual human intervention, and their reliance on information technology is crucial for their proper delivery. Spain has incorporated the EU-wide definition of ESS into its national legislation.

In various countries, terms like digital services, digital products, and electronic services are commonly used. Still, from the perspective of EU VAT liability, these terms align with the definition and scope of ESS.

Taxability Rules for ESS:

For B2B supply of ESS, the general place of supply rules apply, whereas, for B2C supply of ESS, non-resident businesses should follow EU-harmonized VAT rules, which require using the VAT rate of the consumer’s residence.

Regarding distance sales of goods and B2C ESS, if the supplier's annual turnover is below EUR 10,000, they can either apply the VAT rules of their country of residence or use the OSS rules. However, if the supplier’s annual turnover exceeds EUR 10,000, they should apply the VAT rate of the country where the goods are dispatched or the customer receiving the services is located.

How much is VAT in Spain on ESS?

The Spain VAT rate for ESS is 21%.

E-Commerce Rules 

The updated EU VAT rules, which took effect on July 1, 2021, introduced major changes, especially for intra-EU online sales. Notably, the previous distance selling thresholds have been removed and replaced with a single annual distance sales limit of EUR 10,000, applicable across all EU Member States.

The new provisions apply to various transactions, including distance sales of low-value goods imported in consignments valued below EUR 150 from third countries or territories conducted by suppliers and deemed suppliers, except for goods subject to excise duties. 

They also cover intra-community distance sales of goods performed by suppliers or deemed suppliers, domestic sales of goods by deemed suppliers, and B2C services provided by taxable persons either not established within the EU or established within the EU but outside the customer's Member State.

The E-Commerce legislative package revised the structure of previously established EU VAT special schemes, updated the existing schemes, and introduced the IOSS scheme. 

The E-Commerce VAT package now offers the following three special schemes:

• Union Scheme;

• Non-Union -Scheme;

• Import Scheme.

VAT EU Reporting 

EC Sales List

The standard reporting period for ESL in Spain is quarterly, by the 20th of the month following the end of the reporting period. However, monthly filing is required if the total amount of the inter-community supply of goods and services exceeds the EUR 50,000 threshold in the current or any of the previous four quarters. If there are no intra-community transactions in a period, no ESL return is required.

Intrastat 

In Spain, as in most EU countries, Intrastat returns are filed monthly and follow the calendar month. 

When taxpayers exceed the threshold for detailed Intrastat reporting, set at EUR 6 million for arrivals or dispatches, they should submit information on the tax return and the statistical value of the goods involved. The threshold for standard return is set at EUR 400,000 for arrivals or dispatches.

Even if there are no transactions to report in a given month, a nil Intrastat return, indicating no activity, should still be filed. These monthly Intrastat returns should be submitted by the 12th day after the goods movements occurred. Late submissions may incur minor penalties for non-compliance, though these are typically modest.

Digital Reporting

Local Businesses

There are two types of digital reporting that Spanish businesses should comply with:

1. E-invoicing,

2. Immediate Supply of Information - Suministro Inmediato de Informacion (SII),

3. Verifactu System.

E-invoicing

Under Law 25/2013, e-invoicing and invoice accounting record keeping are mandatory in the public sector. All public institutions, regardless of their various units and departments, should receive e-invoices through a publicly accessible, single, common entry point, FACe.

Under Spanish regulations, as of January 15, 2015, all invoices sent to the public sector, B2G transactions, must be submitted electronically in a structured format and signed electronically using a qualified certificate. However, exceptions can be made for invoices not exceeding EUR 5,000.

On the other hand, B2B e-invoicing remains unregulated. On February 2, 2024, the Spanish Ministries of Economic Affairs and Finance and Public Function presented to the Commission the latest amendment to Law 18/2022, titled ‘Crea y Crece’. 

Once approved, all B2B transactions should be supported exclusively by e-invoices, and the Tax Agency should authorize the software solutions used by taxpayers to generate, process, and validate those invoices.

Suministro Inmediato de Informacion (SII)

The Suministro Inmediato de Información (SII) is a mandatory VAT reporting system for resident businesses registered for VAT in Spain with an annual turnover exceeding EUR 6 million. Businesses registered under the Monthly Refund Register and businesses within VAT groups registered in Spain should also use SII. All other businesses can choose to use the SII on a voluntary basis.

Businesses required to use the SII are not obligated to submit other periodic reports, such as Form 347, Record Books 340, and the Annual VAT Return 390.

The SII should be used to report B2B, B2G, and B2C transactions, as well as domestic and intra-EU sales and purchases. Although the SII aims to provide real-time reporting, taxpayers are required to submit the necessary information within four days of issuing the invoice.

Verifactu System

After several years of development, the Verifactu System, a verified billing system, will become mandatory for all companies not subject to SII reporting requirements as of January 1, 2026. In essence, the Verifactu system will transmit all invoicing data directly to the Tax Agency in real time via a secure and reliable internet connection, ensuring the process is automatic, continuous, and tamper-proof.

Non-Resident Businesses

Non-resident businesses registered for VAT in Spain with an annual turnover exceeding EUR 6 million should also use the SII and comply with the same rules as local businesses. Regarding the Verifactu System, non-resident businesses with a Spanish VAT number are not impacted by the new regulation unless they have a fixed establishment in Spain.