VAT tax in Spain

What is the format of a VAT number in Spain?

The Spanish tax ID (or VAT number) for entities has three different formats, all prefaced by "ES" for "España":

• A capital letter plus 8 digits. For example, B12345678 for an SL.
• 8 digits plus a capital letter. For example, 12345678A for a freelancer.
• A capital letter plus 7 digits plus another capital letter. For example A1234567B for a non-resident entity.

Click for more information about the formats of tax IDs in Spain.

What is the VAT tax rate in Spain?

The VAT tax rate in Spain is 21%, with reduced rates of 4% and 10%.

The 10% rate applies to certain goods and services, such as the purchase of newly built properties, hotels and restaurants, health products, and entertainment and sports activities.

The 4% rate applies to goods considered as basic necessities, such as certain food and reading material (newspapers, magazines, books).

For further details about the reduced rates, see this table, published when Spain raised the VAT tax rates in 2012.

In addition to the general regime, there are special regimes with other VAT rules, such as for travel agencies, antiques, and agricultural and livestock production.

Some professional activities are exempt from VAT, such as private classes, medical services by registered professionals recognized in Spain (doctors, dentists, psychiatrists, speech therapists, opticians), financial and insurance institutions and agent commissions.

IGIC (Impuesto General Indirecto Canario): This is the tax in the Canary Islands, in use since 1993. There is no VAT in the Canary Islands, Ceuta or Melilla.

The IGIC tax is charged on acquisition of goods and services in the Canary Islands by companies and professionals doing business within the region, as well as on imports of goods to the region. When a Canarian company or professional does business with mainland Spain it will be considered as an operation without VAT. Since Jan 1, 2020, the standard IGIC rate is back at 7%.

IPSI (Impuesto sobre Produccion Servicio e Importacion): This is the tax in Ceuta and Melilla. This tax dates from 1991. Since February 13, 2019, the rate is 0,5% for services related to marketing, advertising, and e-commerce. Since January 2019, Ceuta has a 0.5% tax rate for the game industry if they have a permanent establishment in Ceuta territory, as described in the regulations regarding IPSI.

Read our pages for information about registering your foreign company in Spain or about registering your Spanish company in the EU VAT Registry (VIES).

FAQs:

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Does my Spanish company always need to include VAT tax when billing our clients?

In general, you must charge VAT tax to clients within Spain and to clients outside the EU, but it depends on the nature of the operation. In case of EU clients, VAT tax must be charged unless:

• The transaction is between two VIES VAT-registered entities in separate EU member states, or
• If a service is delivered to another member state that qualifies under the Reverse Charge rule, in which case the VAT registered recipient would have to self account for VAT tax.

It is the nature of the transaction that dictates whether or not VAT should be charged. In the above exceptions, certain administrative details need to be complied with in order to qualify for the VAT exemption. When in doubt, charge VAT.

If you have a client located in another EU country, in some cases you may have to register in that country then charge VAT from that local entity.

With an SL, when do I get a refund of the VAT tax I've paid?

Your accountant will file VAT forms quarterly. If the VAT tax you've paid is less than the VAT tax you've received, you will be charged immediately for this difference. If it is more, this refund carries over to the next quarter. At the year-end, the final balance is made. If the VAT tax you've paid is more than the VAT tax received and you decide not to carry it to next year, then you can receive a refund, though it may take a long time to arrive in your bank account.

What is a VAT reverse charge?

The reverse charge mechanism implies shifting the tax liability from the supplier to the recipient with respect to domestic commercial transactions whose value exceeds a certain threshold.

For more information, please read the EU site.

My German company is buying in Spain. Can we recover VAT tax paid?

We would first need to evaluate the nature of your business and the category of purchases you are making. Whether or not you have to pay VAT tax will depend on the circumstances surrounding the nature of your business transaction. In some cases, it may have been incorrect for you to have been charged VAT in the first place.

Where refunds need to be made, we can put this process in motion for you.

My French company is selling in Spain. Can we avoid having our Spanish clients pay VAT tax?

This all depends on the nature of the goods or services you are delivering into Spain, and also in some circumstances the nature of the transaction with the recipient.

I operate a shoe company in the USA. We are starting to manufacture our shoes in Spain. Will the VAT automatically be deducted by the Spanish shoe factory, since we are not located in a country that uses the VAT system?

No. Being outside the EU does not exempt your company from paying VAT tax. As an entity, the Spanish factory must include VAT taxes in its invoices because the manufacturing is taking place within EU territory. In order to receive a refund for the VAT tax that you will pay in Spain, your company needs to have a non-resident VAT number.

We are a UK company that provides onsite computer server support. We have been asked to undertake this role in Spain. Since we are required to charge VAT locally, we will require a VAT number, right?

Since you are providing a service within Spain, you must have a corporate entity in Spain. You can register your UK company as a branch office (resident entity in Spain), or you can create a new company in Spain. If you plan to have a fully functioning office in Spain, then creating an SL usually offers more tax advantages. If you don't plan to have a fixed office (your employees will work at the client premises), then a Spanish branch office may be less expensive overall.

We are a Swiss company and we are going to open a call center in Barcelona to serve our European (non-Spanish) clients. Do we need to register for VAT in Spain?

If you have a functioning office in Spain, even though your clients are non-Spanish, you must register in Spain as a resident entity (such as a branch or SL). Also, your Spanish company must obtain an employer social security number in order to hire your employees. Keep in mind that Spanish labour laws apply, even if your employees are non-Spanish.

How can a tourist get a VAT refund in Spain?

If you are a non-EU visitor to Spain and you spend over 90 euros in a "Tax Free" affiliated store, then ask a person from the store for two copies of the tax refund form, and prepaid envelope. On the day of your departure, present the tax refund form to the customs officials at a booth in the airport. Have the goods ready for a possible inspection. They stamp the form, then you mail the form. You will receive your refund in the currency of your choice.