Value Added Tax (VAT) Guidelines: Spain

Generally, the following supplies would be taxable in Spain:

 

All forms of supplies of goods and services which will be provided by an entrepreneur within its business for a consideration made in Spain, the import of goods in Spain from a third country (non-EU Member State) with customs clearance in Spain or intra-Community acquisition of goods in Spain.

 

Certain actions carried out for no consideration are deemed to be supplies, for example, the giving of business gifts, European Union (EU) dispatches within the same legal entity (such as a corporation) and the private use of business assets.

 

Certain transactions are not subject to Spanish VAT, for example, cash payments, the assumption of a debt as a form of payment and genuine compensation payments (damages), transfer of a business as a going concern, supplies within a VAT group or between the head office and a branch (exception: intra-Community transfer of goods).

 

The standard VAT rate is 21 percent, the reduced VAT rate is 10 percent and the super-reduced VAT rate is 4 percent. There are some rules for VAT exemptions as well. It will be distinguished between VAT exemptions with input VAT reco­very and VAT exemption without an input VAT deduction.

 

VAT exempt with input VAT recovery are for example exports or intra-Community supplies of goods from Spain to a third country or another EU Member State or supply, import, repair and maintenance of ships and aircraft under certain conditions.

 

VAT exempt supplies without input VAT deduction are for example supply of services to private and business recipients resident within the EU or second supplies concerning to the real estate.

 

If a business sells goods to a customer who is registered for VAT in another EU Member State and the sale in­volves the removal of those goods from Spain (either by the supplier or the customer) to that EU Member State, then the business does not need to charge VAT and the supply will be treated as an intra-Community supply of goods.

 

If a business sells goods to a customer who is not registered for VAT in another EU Member State and the sales involves the removal of those goods from Spain by the supplier, the supplier will have to charge Spain VAT. If the supplier’s sales exceed a certain threshold applicable in such EU Member State or if a business waives the application of the threshold the business may have to register in the EU Member State under what is known as the Distance Selling Scheme. In this scheme in order to avoid registration in other countries it is possible to apply for the so-called One Stop Shop procedure (OSS).

  

If a business exports goods to a customer (business or private) outside of the EU and the supplier arrange for the goods to be transported the supplier does not need to charge VAT. As a rule, supplies of services provided to a business for business purposes (so-called B2B services) are made where the recipient of the service is established. As a further rule, the place of supply of services to customers/supplier who do not receive such services for their business (so-called B2C services) is where the business providing the services is established. 

Apart from these principal rules, there are special rules for certain types of services.

 

If the customer is resident outside the EU the place of supply of certain B2C services is where the customer is resident or domiciled. 

  

If an entrepreneur performs taxable supplies in Spain, it will be required to notify the Spanish Tax Authorities of the date of commencement of taxable activities; the business will granted a local tax registration number (NIF: Número de Idendificación Fiscal).

 

If an entrepreneur makes intra-Community supplies in Spain, it will be required to notify the Spanish Tax Autho­rities of the date of commencement of such activities, you also be granted a Spanish VAT identification number (Número de Operador Intracomunitario).

 

If an entrepreneur is not registered for VAT in Spain, but sells and delivers goods to customers in Spain who are not VAT registered (distance sales), where the value of all the distance sales performed by this entrepreneur exceeds a threshold of EUR 10,000 in the preceding or in the current year the business is required to register and to account for VAT in Spain.

 

To avoid a VAT registration in Spain this entrepreneur can elect for the registration in OSS system (One Stop Shop) in his EU Member State of identification. There are some simplification rules to avoid a registration for VAT purposes in Spain:

Persons liable to Spanish VAT are required to submit quarterly or monthly VAT returns (depending on the amount of net sales in the previous year) and an annual summary VAT return for each calendar year. Monthly obligation will arise if the net sales (volumen de operaciones) of the previous calendar year are more than EUR 6,010,121.04. Monthly and quarterly VAT returns and annual summary must be filed electronically. Failure to furnish a VAT return in time may result in a late-filing penalty. The amount of penalty will depend on the result of the return, the delay in the presentation and if the late return is previously required by the tax Authorities or not.

 

If an entrepreneur supplies goods that are shipped from Spain to VAT registered businesses in other EU Member States, it is required to correctly complete 349 forms (recapitulative statements) electronically.

 

It is mandatory for businesses to also state in their Form 349 those taxable supplies of services executed in other EU Member States for which the recipient of the service, who is established in another EU Member State, owes VAT in said EU Member State under reverse charge mechanism.

 

Intra-Community acquisitions of goods and services has to be reported in the Form 349. The Form 349 must generally be submitted electronically monthly or quarterly depending on the amount of the respective supplies (if EU supplies in a quarter or in the previous four quarters is more than EUR 50,000 the taxpayer must file monthly returns).

 

Non-compliance with the obligation to properly file Form 349 may result in a penalty. The Intrastat report is a statistical record concerning the intra-Community trade of goods (not services). VAT registered entrepreneurs with a value of dispatches or deliveries to or from EU Member States, which exceed a certain threshold (currently EUR 250,000), must submit supplementary declarations each month.

 

Regulated in Art. 183 et seq. of the General Tax Act, according to which the following actions and omissions are considered tax offences: failing to pay sums due according to tax returns, obtaining undue rebates, unduly applying for rebate and wrongly establishing or proving positive or negative items or tax credits. These offences may be minor, serious or very serious, depending on a number of conditions. Penalties range from 50 percent to 150 percent, according to the nature of the offence.

 

Art. 170 and 171 of the VAT Act 37/1992 regulate specific offences and penalties for VAT, being considered as serious offence, among others, the following: acquisition of goods by taxpayers under the “equivalence surtax” scheme when the invoices do not expressly state the surtax, unless the person acquiring the goods informs the tax authorities accordingly. The penalty is 50 percent of the amount of the equivalence surtax that should have been charged, with a minimum of EUR 30 for each of the transactions effected without charging such surtax.

 

Obtaining of an incorrect charge of the tax through negligence or willful misconduct when the acquiring person is not entitled to full deduction of the VAT paid. The person responsible for the action or omission committed to obtain the incorrect reduction is considered to be the offender.

 

The penalty is a proportional fine of 50 percent of the gain unduly obtained. Undue charging of VAT in an invoice by someone who is not a taxable person, without paying such VAT to the tax authorities.

 

The penalty is a proportional fine of 100 percent of the amounts unduly charged, with a minimum of EUR 300 for each invoice or equivalent document in which the offence is committed. Failure to state in the VAT returns the amounts of the taxable transactions for which the receiver is the taxable person (reverse charge-mechanism).

 

The penalty is a proportional fine of 10 percent of the VAT corresponding to the transactions not stated in the return. Failure or delay in the fulfilment SII obligation (Immediate Supply of Information)  Fines from 0.5 percent to 1 percent of the non-declared, late or incorrect amounts with a maximum of EUR 6,000. 

 

If your business is registered for VAT purposes in Spain it is possible to declare and deduct Spain input VAT within the VAT return on the regular tax procedure under further preconditions.

 

It is also possible to recover Spanish input VAT if the entrepreneur is not registered for VAT purposes in Spain or have its domicile, registered office, place of management or permanent (fixed) establishment in Spain.

 

For entrepreneurs who are resident in an EU Member States the 8th EU VAT Directive of the will be applicable. Entrepreneurs of non-EU countries have to apply for the 13th EU VAT Directive (reciprocity is required).

 

The VAT will be refunded if it is deductible in the same conditions than for the general regime. For example, there are certain items that you cannot recover input VAT on: exempt supplies (VAT relating to both taxable and exempt supplies must be apportioned), non-business (including private) activities (where VAT relates to both business and non-business activities, VAT is recoverable in full in some cases. However, in such cases, VAT will generally be levied on the private and/or non-business use), expenses (VAT can be recovered only if charged to a taxable person in relation to its business). Where invoices and bills are addressed to an employee, the VAT is not deductible.

 

As a general rule Input VAT on employee expenses will be deductible/recoverable if this expense is not consider as a payment in kind for the employee in the Personal Income Tax Law (the expenses are business purposes not for personal purpose of the employee).

 

There are special rules for the rent or acquisition of company cars. It is presumed that the use of these cars is for business purposes in a 50 percent, it is possible to deduct more than 50 percent VAT if proved that the use of the car for business purpose is higher than 50 percent. For industrial vehicles (commercial vehicles and trucks) the presumption of business use is of 100 percent.

There are formal invoicing requirements according to the Spanish VAT law regarding the right to deduct of the Spanish input VAT.

 

If invoices do not content all of the necessary requirements or if some indications are not correct it is possible to amend these invoices by the issuing of the so called “factura rectificativa”.

 

An electronic submission of invoices (e.g. via email, computer fax) is generally possible. Specific conditions must be fulfilled by the recipient regarding the validity and the integrity of the issued/received invoice, for example, an internal control system, use of a qualified electronic signature or an electronic data interchange procedure (e.g. EDI). A qualified electronic signature or an EDI procedure is not mandatory. Electronic invoicing system has to be accepted by the recipient of the invoices.

 

To operate via self-billing is possible, provided an entrepreneur has the agreement of the customer before doing so. If the recipient of the supply issues an invoice to the supplier (and not the supplier by itself) – in scope of the self-billing procedure – the invoice documents will contain the term “facturacion por el destinatario”.