Value Added Tax in Spain is a consumer tax charged on the supply or importation of taxable goods or services in Spain however because Spain joined the European Union in 1986, their association affects some of their tax laws. Although Spain determines the level of its VAT rates, it has to follow certain EU regulations such as having the standard VAT rate above 15%.
Spanish VAT rates
When Spain became a member of the European Union, it introduced Value Added Tax and it has incorporated the EU VAT directives into local Spanish VAT laws as well as its regulations.
The country also follows certain broad rules set by the EU. This includes Spanish VAT registrations, compliance, and returns.
The current rates are 21% for standard goods and services. There are also two kinds of reduced VAT rates at 10% and 4% respectively. These are reduced for certain foodstuffs, pharmaceutical products, medical equipment, books and other social services or goods that benefit the community.
The last kind of VAT rate is the zero tax rate which typically exempts taxation of some gold coins, ingots, and bars and also affects intra-community and international transport by air and sea.
The Agencia Estatal de Administración Tributaria is the body that oversees matters concerning VAT laws. It makes sure the mandated VAT rates are used by providers of taxable services when selling their goods or delivering services.
Any business within Spain that makes taxable supplies of goods or services might be required to charge VAT and they must be registered for Spanish VAT. Another EU regulation, Spain follows is the requirement for foreign companies to register for local VAT.
Spanish VAT Registration
The steps for Spanish VAT registration are straight forward but the application must be made in Spanish. Acquiring a Spanish VAT number involves making an application with supporting documents such as a notarized Power of Attorney for the company’s fiscal representative, a VAT certificate that proves the business is registered for VAT elsewhere in the EU if necessary, Memorandum and Articles of Association, an extract from the company’s national trade register, and a declaration that the company does not have a permanent establishment in Spain.
From 2004, EU countries are no longer require foreign companies to appoint a VAT fiscal representative for the purposes of VAT. Spain has not really adapted to this regulation and still compels countries to have a fiscal representative who will share the client’s tax liability.
This applies to both EU and non-EU companies. Note that companies requiring a Spanish VAT number must submit their application to the local tax office of the company’s fiscal representative. Also noteworthy is the fact that there are fines for late registration if taxable supplies have already been provided.
Spanish VAT Compliance
Once registered for Spanish VAT, local laws must be followed. This includes the keeping of accounts and records of VAT for at least 10 years. There should also be authentic electronic invoices that have the proper signatures and agreements with the recipient. Issuing these invoices must follow the details meted out by the Spanish VAT laws and should be correctly invoiced.
It is required by the law to use approved foreign currency rates and to process credit notes. Correct invoicing of customers for goods or services must be done in accordance with the Spanish time of supply VAT rules.