Global

Details

  • Service: Tax, Global Indirect Tax
  • Type: Regulatory update
  • Date: 6/1/2013

Spain: VAT essentials 

Essential information regarding VAT as it applies in Spain.


Scope and Rates

What supplies are liable to VAT?


Value-added tax (VAT) is due on any supply of goods or services made in Spain, where it is a taxable supply made by a taxable person in the course or furtherance of a business carried on by said person. Supply includes all forms of supply. It is not restricted to the provision of goods and services by way of sale but can apply equally to other forms of transaction.


Supply does not include anything done otherwise than for a consideration. However, certain actions carried out for no consideration are deemed to be supplies as a self-consumption for example, giving goods for free or the private use of business assets.


Certain transactions are not subject to Spanish VAT. For example, the supply of money as consideration or a payment, giving free samples, the supply of goods by national and local governments for a consideration in the nature of a tax, or a similar charge.


For VAT purposes, the Spanish territory is the peninsula plus the Balearic Islands but it does not include the Canary Islands, Ceuta, and Melilla.


What is the standard rate of VAT?


The standard rate of VAT is 21 percent (since 1 September 2012).


Are there any reduced rates, zero rates, or exemptions?


Yes. There is a reduced rate of 10 percent (since 1 September 2012) for certain goods and services, including, among others:


  • food and drinks
  • residential renovations and alterations
  • water supplies
  • flowers and plants
  • certain medical instruments and medicines
  • certain buildings used for residential purposes including the rentals with a purchase option clause
  • passenger transport
  • sporting and cultural events/services
  • hotel and restaurant services
  • the supply and receipt of certain digital radio and television broadcasting services.
  • On 18 March 2012, Royal Decree 8/2012 extended the scope of application of the reduced rate introduces to a new category of services: the transfer of the rights of timeshare contracts of buildings, building complex or distinct sectors when the building comprises at least ten accommodations, in accordance with the corresponding regulations.

There is a special reduced rate of 4 percent for certain acquisitions and importations, including:


  • basic food elements
  • books
  • newspapers
  • certain medicines (Commission referred Spain to ECJ over reduced VAT rate on medical items)
  • invalid carriages and wheelchairs
  • prosthetic limbs
  • housing subsidized by the Government including the rentals with a purchase option clause
  • with effect from 20 August 2011 until 31 December 2012, Royal Decree 9/2011 extends application of the reduced rate of 4 percent to the supply of buildings or parts thereof fit for use as dwellings, including parking garage places, with a maximum of two units, and annexes located in the property which are jointly conveyed. In this regard, commercial premises cannot be regarded as dwellings even if they are jointly conveyed with the buildings destined to be used as dwellings. Buildings destined to be demolished shall not be considered fit for use as dwellings.

The list of exemptions includes:


Exemptions with input tax recovery (zero-rate supplies), among others:


  • exports
  • financial transactions outside the European Union (EU) Member States
  • supply, import, repair, and maintenance of ships and aircraft engaged in international navigation.

Exemptions with no input tax recovery (exempt supplies), among others:


  • health and welfare related supplies
  • education
  • cultural services by bodies governed by public law
  • financial transactions
  • insurance
  • certain games of chance
  • certain supplies by public post offices
  • real estate transactions (certain transfers of land and second transfers of real estate).

What are the other local indirect taxes beside VAT?


The other local indirect taxes are:


  • Property Transfer Tax, Stamp Duty and Company Transactions Tax, foreseen in Royal Decree 1/1993
  • excise duties, foreseen in Royal Decree 38/1992, dated 28 December, imposed on:

    • special manufacturing products:
      • alcohol and alcoholic beverages
      • hydrocarbons
      • tobacco
      • electricity

  • Registration of certain motor vehicles.
  • Coal.

top

Registration

Who is required to register for Spanish VAT?


Spanish Entities


If a business makes taxable supplies in Spain it will be required to register and account for Spanish VAT.


Non-Spanish Entities


Under Spanish VAT legislation it is not possible for a non-Spanish entity to voluntarily register in Spain and act as a Spanish established entity. The cases in which a non-Spanish entity has to register on a compulsory basis are:


  • if it has a VAT permanent establishment in Spain
  • if it is the taxpayer of a transaction (the entity liable to pay the tax), even if it does not have a VAT permanent establishment in Spain.

No VAT registration threshold exists in Spain.


The registration rules that apply to Spanish entities generally apply to non-Spanish entities that are making taxable supplies in Spain. However, a business is not entitled to be registered for Spanish VAT in the following cases:


  • If it is not established in Spain for Spanish VAT purposes and only carries out operations in Spain subject to the reverse charge mechanism applies (operations where the Spanish VAT taxpayer would be the recipient of the service/goods). Please note that the reverse charge rule in Spain has wide application as explained in the section ”International Supplies of Goods and Services “)
  • If it is not established in Spain for Spanish VAT purposes and carries out a VAT exempt intra-Community acquisition of goods as an intermediary in an intra-EU triangular transaction, according to the simplification rules that for this specific transactions are established in the EU VAT Directive (Council Directive 2006/112/EC).

If a registration as “non established taxpayer” in Spain is necessary an overseas business may appoint a VAT representative to deal with its VAT affairs. The representative will not be jointly liable to the tax authorities. From a practical perspective it is advisable to operate with a Spanish VAT representative.


The requirement to appoint a VAT representative is mandatory if the company resides either out of the EU or in a country with which Spain does not have an agreement regarding mutual assistance in the collection of taxes.


If a company is not registered for VAT in Spain but sells and delivers goods which come from an EU country to customers in Spain who are not VAT registered (distance sales), where the value of those sales exceeds a threshold of EUR 35,000, the company is required to register and account for VAT in Spain.


If the company is established outside the EU and supplies services electronically to customers in Spain who are not VAT registered, then the place of supply is in principle Spain and, consequently, it will then have to register for Spanish VAT.


If a company is not established in Spain for VAT purposes, but sells natural gas or electric power to customers in Spain who are not registered, it is required to register and account for VAT in Spain if the consumption takes place within Spain. In this sense, it is understood that the consumption takes place in Spain if the meter which measures the amount consumed is located in Spain.


Are there penalties for not registering or late registration?


A penalty of EUR 400 for failing to register for VAT promptly will be imposed. Please note that this penalty would be imposed for not registering. However, please note that the late submission of a Spanish registration form will reduce the above mentioned penalty to EUR 200.


Is voluntary VAT registration possible for an overseas company?


It is not possible.


Are there any simplifications that could avoid the need for an overseas company to register for VAT?


A business making supplies of goods or services in Spain is required to register and account for Spanish VAT provided that it is considered to be the Spanish VAT taxpayer of the transactions (that is, the reverse charge rule does not apply). However, it is possible to avoid registering and accounting for Spanish VAT when making certain supplies.


In the following examples the obligation to account for the VAT is shifted to your customer provided that your customer is registered for Spanish VAT.


Triangulation


If a business is an intermediate supplier to a Spanish buyer of goods purchased from a business in another EU Member State and that are delivered from there to Spain, VAT due can be accounted for by the Spanish customer.


Reverse Charge Mechanism


If a company is not established in Spain for VAT purposes supplies goods and/or services to companies established in Spain, the reverse charge mechanism applies, the Spanish company is responsible for accounting for the VAT to the tax authorities on the supply. Some examples of this transfer of liability would be call-off stock, the supply of goods to be installed, and reverse charge services.


Bear in mind that these provisions are subject to particular requirements.


Does an overseas company need to appoint a fiscal representative?


According to Spanish VAT Law, appointing a fiscal representative for taxpayers who are not established in the EU is compulsory, except for companies established in Canary Islands, Ceuta, Melilla, or in another country with which an agreement of mutual cooperation exists. In practice most companies appoint a representative on a voluntary basis.

top

VAT grouping

Is VAT grouping possible?


A VAT grouping regime has been applicable in Spain since 1 January 2008. This regime is applicable on a voluntary basis being its general characteristics the following:


  • Who can apply it: a dominant entity with legal personality, established in VAT territory (Spanish peninsula and Balearic Islands) which has a direct or indirect participation (that has to be kept during the full calendar year) equal to or higher than 50 percent in other entities – dependent companies – also established in the above mentioned VAT territory. A permanent establishment is allowed to act as a dominant entity but cannot be dependent entity. An entity cannot form part of two groups at the same time, nor can a dominant entity be dependent of another dominant entity established in VAT territory.
  • Voluntary nature: the application of this regime (that must be approved by the board of directors or equivalent body of the companies of the group) is voluntary and has a minimum validity of three years that will be extended except in the case of an express waiver. Thus, it is possible that some entities of the group apply the regime while others do not. The companies of the group that apply the regime in its basic level could additionally apply for the advanced level, which has a validity of one year.
  • Content: this special regime has two levels:


    • Basic Level (Aggregation Modality): it allows the monthly compensation of the balances of the VAT returns of each member of the group, by simply compensating the positive and negative balances in the aggregated group VAT return and directly declaring the net result to the tax authorities. Each group member remains independent taxpayer and liable to file its individual VAT return.
    • Advanced Level (Consolidation Modality): the advance level is aimed at reducing the VAT cost on transactions made between related parts which form part of a group. It is envisaged that this level will only be implemented by entities which have a limitation of the recovery of input VAT. It basically reduces the taxable base from market price to the cost which originally represented an external input VAT. However, it is important to note that it does not fully eliminate the VAT cost as the transactions between group members are not ignored, but rather a special taxable base will be applied. From a technical point of view, three rules have been introduced:


      • taxable base special rule: it will consist of the cost of the goods and services used in the intragroup transactions on which Spanish VAT has been effectively borne. Costs without VAT (such as personnel or financial costs), or commercial margins will not be included.
      • Exemption waiver: It is possible to waive (on a case-by-case basis and reflecting such waiver in the corresponding invoice) all the partial exemptions (contained in article 20.one of VAT Law 37/1992, articles 132-137 of the EU VAT Directive) and therefore to allocate the cost of the goods and services VAT taxed and acquired to a third party to the group company final user. Depending on the limitations of the recovery of the input VAT of the group companies involved in the service, the exemption waiver could imply significant opportunities to recover more VAT.
      • The intragroup transactions are considered as a separate activity sector: the VAT borne on the acquisition of goods and services directly or indirectly, totally or partially, used for carrying out intragroup operations, can be deducted in proportion to the use made of the abovementioned goods and services in such intragroup activities.

If the advanced level is applied, the dominant entity as the representative of the group is obliged to keep an analytical accounting system during the statute of limitations period.


To be a member of a VAT group it is necessary to be an entrepreneur.


Can an overseas company be included in a VAT group?


No, but in some cases a permanent establishment of a non-resident company can be the dominant member of a Spanish VAT group. This is not a frequent scenario.

top

Returns

How frequently are VAT returns submitted?


Most registered businesses are required to submit VAT returns on a quarterly basis (303 form). However, if the annual turnover (excluding VAT) exceeds EUR 6,010,121.04 in the prior calendar year then the company is required to submit monthly VAT returns in the following year on a compulsory basis.


In addition, the company will be obliged to submit monthly VAT returns if it is included in the monthly VAT refund regime. Inclusion in the regime is optional. Inclusion allows a business to request a refund on a monthly basis up to a certain limit. The 303 form will be used by all VAT payers regardless of whether they file their VAT returns on a quarterly or monthly basis. Please note that these VAT returns must be filed electronically through the Spanish tax authorities’ web site (www.aeat.es).


However the said form will not be used by VAT payers registered under the Special Simplified Regime or in the Special VAT Grouping Regime, who will have to file specific VAT forms.


Are there any other returns that need to be submitted?


Annual Summary VAT Return – Model 390


In addition to quarterly/monthly VAT returns, businesses must submit an annual summary VAT return at the end of the year, the 390 form.


VAT Reporting Report Including the VAT Bookkeeping – Model 340


The VAT payers applying the Special Monthly VAT Refund Regime will have to submit, the VAT reporting 340 Form, which includes all the information included in the VAT bookkeeping registers, on a monthly basis in addition to their monthly VAT returns,. The 340 Form will be submitted by electronic means using an electronic signature within the deadline established for filing VAT returns.


In principle this type of VAT reporting will become compulsory for all taxpayers as of 2014.


Information referring to the 340 Form “Declaración informativa de operaciones incluidas en los libros registro” can be accessed on the Spanish tax authorities’ web site.


European Sales List (Recapitulative Statements) – Model 349


If a business supplies goods and provides services from Spain to VAT registered businesses in other EU Member States or acquires goods and services in Spain shipped or provided from VAT registered businesses in other EU Member States, it is required to complete EU transactions recapitulative statements. Recapitulative statements are completed on a monthly basis; although provided thresholds of supplies of goods and services are not exceeded, the tax authorities may allow a business to submit them on a quarterly or an annual basis.


Please note that these returns must be filed electronically through the Spanish tax authorities’ website.


Annual Informative Return – Model 347


This is a specific Spanish return that is merely an informative return, needed by the Spanish tax authorities to match information between Spanish suppliers and their customers. The return lists the businesses with which Spanish taxpayers carried out transactions with a value of more than EUR 3,005.06 during a civil year.


Intrastat Supplementary Declarations


VAT registered businesses with a value of dispatches or arrivals to or from other EU Member States, which exceed a threshold (EUR 250,000 per calendar year) must complete supplementary declarations each month.


Please note that these statistic returns must be filed electronically through the Spanish tax authorities’ web site (www.aeat.es) if the taxpayers carried out transactions with a value of more than EUR 6,000,000 in the prior year.


Non-compliance or inaccurate compliance with Intrastat reporting requirements may result in a penalty between EUR 60 to EUR 3,005.06 per declaration either not filed or filed after the deadline. Since May 2010 penalties have been applied automatically for failure to file returns, and late or inaccurate filing. Previously the authorities would request companies to voluntarily solve the issues before being fined.


If a business receives a purchase invoice in foreign currency, which exchange rate should be used for VAT reporting purposes? (e.g. central bank’s exchange rate applicable on the date of the invoice)


The exchange rate applicable shall be the latest selling rate recorded, at the time the VAT becomes chargeable, on the European Central Bank, which is communicated to the Spanish Central Bank.

top

VAT recovery

Can a business recover VAT if it is not registered?


Yes. A business established in another EU Member State should make a claim under the local procedures implementing EU Directive 2008/09/EC.


For businesses established in the Canary Islands and the Cities of Ceuta and Melilla the applicable procedure is the same that the one applied by Spanish VAT taxpayers for claiming their VAT refunds in EU countries.


Non-EU business should recover the VAT under the 13th EU VAT Directive if it is resident in a country with which Spain has a reciprocity agreement.


Please note that these VAT returns must be filed electronically through the Spanish tax authorities’ website by the VAT representative of the entity in Spain.


Under both of these provisions there are strict time limits for making claims: the claim period covers a quarter or a calendar year and claims must be submitted at the latest by the 30 September of the following calendar year.


Please note that Canarian Islands, out of the territorial scope of the Spanish VAT but with an Indirect Tax similar to VAT, the deadline to apply for the refund of Canarian Indirect Tax is 30 June.


Does your country apply reciprocity rules for reclaims submitted by non-established businesses?


The reciprocity rule is applied by the Spanish tax authorities. Reciprocity for VAT refund purposes with a specific country is recognized through a Resolution of the Spanish General Tax Directorate that defines the scope applicable to the refunds of Spanish VAT granted to businesses established in that country. At present Spain applies this rule with the following countries: Canada, Israel, Japan, Monaco, Norway, and Switzerland. In some cases the reciprocity is limited to certain kind of expenses.


Are there any items that businesses cannot recover VAT on?


Yes. There are certain items that businesses cannot recover VAT on. For example:


  • Partial exempt supplies: where VAT relates to both taxable and partial exempt supplies, you need to make an apportionment (pro rata rule).
  • Non-business (including private) activities: where VAT relates to both business and non-business activities, VAT is not deductible.
  • Motor cars (excluding commercial vehicles): with certain exceptions you can recover 50 percent of the VAT incurred on the purchase and lease of cars. Should the company be in a position to prove that use for business purposes exceeds 50 percent, an additional amount of VAT may be deducted (this percentage may also be reduced if business use is less than 50 percent). The recovery percentage applicable to motor cars is also applicable to the following supplies of goods or services directly related to the cars:

    • accessories and spare parts
    • petrol products and lubricants
    • parking services and use of toll-ways
    • car repair services.

  • Business entertainment: VAT is not generally recoverable on business or staff entertaining costs.
  • Purchases falling within the Tour Operators' Margin Scheme: the VAT incurred on the incoming goods and services acquired by taxpayers, who fall under this scheme cannot be reclaimed.
  • Goods sold under one of the margin scheme for second hand goods: VAT related to the acquisition of said goods is not recoverable by taxpayers which fall under this margin scheme. There are a number of schemes which provide for VAT to be accounted for on the goods' sales margin, but do not allow VAT recovery on the purchase of those goods.
  • Expenses: VAT can be recovered only if charged to a taxable person. Where invoices and bills are made out to an employee, the VAT is not deductible. Spain has very strict rules on formal issues and frequently VAT credits are denied because of not fulfillment with.

top

International Supplies of Goods and Services

How are exports of goods and services treated?


Goods in the EU


If a company supplies 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 you or your customer) to that Member State, then it does not need to charge VAT and may zero rate the supply as an intra-EU dispatch. The supplier must obtain the customer's EU VAT number different from a Spanish one and quote it on its invoice. It must also obtain evidence of the goods' removal from Spain.


If it supplies goods to a customer who is not registered for VAT in another EU Member State, it will have to charge Spanish VAT. However, if the sales exceed a certain threshold for that Member State it may have to register in the Member State under what is known as the Distance Selling Scheme, provided the conditions of the sales meet certain conditions.


Outside the EU


If a company exports goods to a customer (business or private) outside of the EU then it does not need to charge VAT but, as for intra-Community sales, it should make sure that in all cases you keep proof of dispatch/delivery to support your zero rating.


Services


If a Spanish established business supplies services to a foreign business customer (B2B), in general the supply of services is taxable in the country of the recipient under the reverse charge mechanism. If the company supplies services to a private consumer (B2C), the services are in general taxable in the country of the supplier and therefore subject to Spanish VAT.


The following exceptions apply to the B2B and B2C main rules as described above:


  • services connected with immovable property (taxable in the country where the real estate is located)
  • restaurant and catering services (taxable in the country where these services are performed. Other rules apply if these services are performed on board a ship, aircraft, or train).
  • passenger transport (taxable in the country where the transport services are actually performed).
  • services with regard to cultural, artistic, sporting, scientific, educational, entertainment, and similar activities, as of 1 January 2011, the place of supply of admissions shall be where those events take place (B2B); or o where those activities take place (B2C)
  • short-term hiring of transportation vehicles (for ships maximum 90 days/for other means of transport maximum 30 days) taxable in the country where the vehicle is actually put at the disposal of the customer.

The following exceptions apply to the B2C main rule:


  • intermediary services (taxable in the country where the underlying transaction is taxable)
  • intra-Community transport of goods (taxable in the country of departure). For other types of goods transportation for non-taxable customers, the place of service is the place where the transportation is actually performed.
  • transportation-related services (taxable in the country where the services are physically carried out)
  • services involving movable tangible goods (taxable in the country where the activities are actually carried out)
  • electronically supplied services rendered by a VAT entrepreneur not established in the EU to non-taxable customers (taxable in the country where the customer of the service is located).

The following services performed for customers that are established or resident outside the EU are taxable in the country where the customer is established:


  • the transfer of copyrights, patents, licenses, trademarks and similar intellectual/property rights
  • transfers of goodwill, exclusive right to trade or to perform professional activities
  • advertising services
  • services of advisors, consultants, accountants, engineers, lawyers and other similar services excepting the services directly connected with immovable property
  • data processing and provision of information services
  • translation, proof reading and interpretation services
  • banking, insurance and other financial services; with the exception of the hire of safes;
  • the supply of staff
  • dubbing services
  • hiring out of movable property, with the exception of means of transport and containers
  • The provision of access to a natural gas system or to any network connected to such a system, to the electricity-distribution system and the provision of other services directly liked thereto
  • the obligation to refrain from pursuing or exercising, in whole or in part, a business activity or a right referred to in this article
  • electronically supplied services and
  • telecommunication services and radio and television broadcasting services.

Please note that for certain services specific rules may apply.


Finally, there is a special “use and enjoyment” provision established in Article 70.2 of the Spanish VAT Law, implementing Article 59.a of the Council VAT Directive, that could trigger Spanish VAT on certain services when the service, according to the general place of supply rule, is considered to be provided outside of the EU and the effective place of consumption of these services is within the Spanish VAT territory.


How are goods dealt with on importation?


When goods are imported into Spain from outside the EU, import VAT and customs duty may be due. This has to be paid or secured before the goods will be released from customs' control.


How are services which are brought in from abroad treated for VAT purposes?


If a VAT entrepreneur established in Spain or a legal entity having a VAT identification number and buys in certain services from outside Spain, it will be required to apply the reverse charge mechanism. This is intended to take away any VAT advantage of buying those services from outside Spain.


Under the reverse charge the recipient is required to account for a notional amount of VAT as output tax on its VAT return covering the period when the services where received and it recovers this VAT as input tax on the same return according its VAT input recovery right.


If a company is entitled to recover all of the VAT the reverse charge has no cost effect and is a VAT compliance matter only. However, if a company is are partly exempt there is likely to be a VAT cost depending on the level of recovery allowed under the partial exemption method.


The reverse charge mechanism applies whenever the VATable supply of the services/goods is carried out in Spain by a non-established company to an established one, regardless of the kind of operation being carried out. If both the supplier and the recipient were not VAT established in Spain, it would be necessary to analyze on a case-by-case basis the transaction to determine who the taxpayer is.


The scope of local reverse charge rules is very wide and applies not only to services but also to goods. Certain specific services for which the B2B main rule does not apply may result in another place of supply of the service than Spain. This could lead to VAT obligations for the supplier or recipient in the country in which the service is taxable. For an overview of the exceptions to the B2B main rule please refer to the section "How are exports of goods and services from Spain treated?"

top

Invoices

Is a business required to issue tax invoices?


Yes, a taxpayer is required to issue tax invoices for its transactions and in accordance with the requirements established in the Spanish Invoicing Regulation.


As of 1st January 2013, as per the implementation of Directive 2010/45/EU, Spanish invoicing rules are applicable when:


  • When the supply of goods and services are deemed to be made within the Spanish VAT territory, unless the provider is a non-established entity and the taxable person is the party obliged to account for Spanish trough the reverse charge procedure.
  • When the supplier has established his business or has a fixed establishment from which the supply is made within Spanish VAT territory or, in the absence of such place of establishment or fixed establishment, has his permanent address or usually resides.

On the other hand, simplified invoices have been introduced which replace tickets and their issuance is allowed in the following cases:


  • When the amount of the transactions does not exceed EUR 400, VAT included.
  • In case of issuing rectifying invoices, which constitutes an important modification.
  • For those cases in which the previous regulations accepted the issuance of tickets (replaced by simplified invoices from 1 January 2013) and for cases that Spanish Tax Authorities will authorize in the future.

What do businesses have to show on a tax invoice?


A tax invoice should contain the following data:


  • date of issuance
  • a sequential invoice number: Invoices issued by a business permanently established in Spain will have a special sequential number different from that corresponding to transactions carried out in other countries. Different series of invoices should also be assigned to credit and debit notes, invoices issued on behalf of a business by third parties and to operations subject to the reverse charge. If the invoice adjusts an earlier invoice (such as, a credit note), reference must be made to the original invoice
  • supplier VAT number: The Spanish VAT number of the supplier always has to be shown
  • customer VAT number: The VAT identification number of the customer must be included on the invoices documenting the following operations:

    • those in which the customer is the Spanish VAT taxpayer, that is the person liable to pay the Spanish VAT on the supply of the goods or the services, under the reverse charge mechanism
    • the intra-Community deliveries of goods
    • those located in Spain for Spanish VAT purposes.

In spite of the above, there is no obligation to include the VAT identification number of the customer on the invoice, if the customer is an individual, and the amount of the consideration does not exceed EUR 100 excluding VAT.


  • supplier name and address
  • customer name and address
  • the quantity and nature of the goods/services supplied
  • tax point (date of taxable supply) only if it is different from the date of issue
  • the taxable amount per rate
  • unit price (exclusive of any VAT)
  • rate of any discounts (if not included in the unit price and if applicable)
  • the VAT rate applicable
  • the amount of VAT payable in EUR
  • if the invoice documents an operation which is VAT exempt, not-subject to VAT, or to which the reverse charge mechanism applies, a mention must be made to the EU VAT Directive/Spanish VAT Law or else an indication of this issue.

Local language requirements: Invoices may be drafted in any language but a Spanish translation may be required by the Spanish tax authorities.


Exempt supplies


In principle, VAT taxpayers are obliged to issue an invoice even if it corresponds to an exempt supply. However, the Spanish Invoicing Regulation establishes that VAT taxpayers that carry out certain exempt supplies (that is, financial services, insurance and reinsurance services, etc.) do not need to issue invoices for these supplies, if the purchaser is a private person.


Can businesses issue invoices electronically?


Yes.


Is it possible to operate self-billing?


Yes.


Can a business issue VAT invoices denominated in a foreign currency?


Yes, invoices can be issued in a foreign currency, however the VAT due should always be shown in Euros.

top

Transfers of Business

Is there a relief from VAT for the sale of a business as a going concern?


Yes. If a company sells its business as a going concern then VAT may not be due. The rules in Spain have adopted a more open approach based on EU case law, and are accepting the application of this rule on a wider basis than in the past.

top

Options to Tax

Are there any options to tax transactions?


There is an option to tax real estate deliveries by waiving the partial exemption, if certain requirements are met.


If advanced level VAT Grouping is implemented it is also possible to waive (on a case-by-case basis and reflecting such waiver in the corresponding invoice) all the partial exemptions (contained in article 20, one of VAT Law 37/1992, articles 131-137 of the EU VAT Directive).

top

Head Office and Branch transactions

How are transactions between head office and branch treated?


If your head office makes a charge related to services to its branch or vice versa, this is not treated as a supply for Spanish VAT purposes, as both the head office and its branch are considered the same entity. This is not regulated in the VAT Law but it is the interpretation provided by the tax authorities. However, this does not apply to movement of goods between two VAT registrations of a same entity that are treated as operations similar to intra-EU deliveries of goods (transfers of goods).

top

Bad Debts

Are businesses able to claim relief for bad debts?


If more than one year (or 6 months if the annual turnover of the company is below EUR 6,010,121.04) has passed from the tax point without having received payment, then a business is able to claim VAT back on the unpaid element through its VAT return during the following 3 months insofar that the unpaid debt has been claimed in front of the Spanish Courts or a public notary has formally requested for payment.


If the debtor is an individual, the above mechanism only applies when the VAT taxable base of the operation exceeds EUR 300.


In addition, VAT on bad debts can be claimed when the customer is in a creditors meeting situation if declared by the Spanish Courts.


Bad debt relief is very restrictive as it requires application for the intervention of the Spanish Courts or a notary. However, the unpaid output VAT charged to public entities can now be recovered, which was not possible before.

top

Anti-Avoidance

Is there a general anti-avoidance provision under VAT law?


As a general rule, a company is free to organize its business methods the way it deems appropriate. However, the Spanish tax authorities are empowered to disregard artificial and/or fictitious dealings whose sole purpose is to evade the tax or lower the tax liability which would have otherwise ensued (Articles 15 and of the Spanish General Tax Procedure Law).


Notwithstanding the above, the Spanish VAT Law establishes, in principle, the following specific anti-avoidance provisions:


  • Transactions between related parties: the taxable base of supplies of goods or services between related parties must be at market value, only in those cases in which there may a loss of revenue for the Spanish tax authorities.

    This rule would be only applicable in cases where the Spanish tax administration suffers an effective economic damage. These three cases are similar to the cases established in article 80 of the EU VAT Directive (Council Directive 2006/112/EC).
  • Use and enjoyment rule: despite the location rules established in Spanish VAT Law, it is considered that certain services are located for VAT purposes in Spain if their use or enjoyment actually takes place in Spain, insofar that according to the location rules they would not be located in another EU Member State, the Canary Islands, Ceuta, and Melilla

    This rule affects to intangible services, electronic supplied services and intermediation services rendered to business entrepreneurs and telecom services and rental of means of transport services supplied to any party.
  • Subsidiary liability for the recipient of certain operations: in order to reduce fraud in the application of VAT, the VAT Law establishes a subsidiary liability regime for the output VAT due that has to be paid to the treasury for those recipients (acting as entrepreneurs for Spanish VAT purposes) of transactions in which it can be reasonably presumed that the VAT charged, or that should have been charged in those operations, has not been paid or will not be paid by the seller to the Treasury. The intention of this clause is, in principle, to avoid the so-called carrousel fraud.

top

Penalty Regime

What is the penalty and interest regime like?


There are certain penalties for failing to fulfill formal obligations. The penalties for failing to register or late registration have already been addressed above.


The general penalty for failing to pay the VAT due amounts to 50 percent of the unpaid VAT. However, this percentage can be increased depending on certain criteria such as the repetition of infractions or hiding of relevant information up to 150 percent.


VAT taxpayers who fail to pay the VAT due are obliged to pay interest accrued from the last day of the voluntary payment date until the day in which the payment is effectively made. Delay interest rates vary each year, (5 percent for tax year 2012). Delay interest only applies to the unpaid VAT due and not to penalties.


The late payment of VAT on a voluntary basis without any prior requirement from the Spanish tax authorities would imply a surcharge of 5 percent (if payment is made within three months from the due date), 10 percent (if paid within three to six months), 15 percent (if paid within six to 12 months) and 20 percent (if paid after 12 months) along with delay interest. Despite this, such surcharges will be reduced a 25 percent in case the VAT taxpayers pay them totally within the legal deadline established by the Spanish Law.

top

Tax authorities

Tax audits


How often do tax audits take place?


There is not a specific regularity. It really depends on the kind of business, size of the company. It is not possible to predict when an audit will take place.


Are there audits done electronically in your country (e-audit)? If so, what system is in use?


Yes, the legal requirement is in place from tax audits starting after 1st January 2004. In practice, electronic data access by tax authority is not very much implemented. In the event of an electronic tax audit, data must be supplied in a format that can be processed by the fiscal authorities' audit software IDEA.


Advance rulings and decisions from the tax authority


Is it possible to apply for formal or informal advance rulings from the (indirect) tax authority?


Yes, formal tax rulings before the Spanish General Tax Directorate.


Are rulings and decisions issued by the tax authorities publicly available in your country?


Yes, there is a tax database with the resolutions to the tax rulings issued by the General Tax Directorate available on the tax authorities’ web site. Any other taxpayer with exactly the same case can apply the tax rulings. The names of the taxpayers are not public.

top

Miscellaneous

In your country, are there unique specific indirect tax rules (regimes) that differ from standard indirect tax rules in other jurisdictions?


Yes. In Spain there are special schemes not regulated by Council Directive 2006/112/EC, which are as follows:


  • special compensatory charge scheme.
  • special scheme for entity groups (as explained in section “VAT Grouping”).

Are there indirect tax incentives available in your country (e.g. reduced rates, tax holidays)?


No, beside the reduced rates (as explained in section “Scope and Rates”).

 

Share this

Share this

Meet the team

KPMG’s Global Indirect Tax team members are based around the world.

Country VAT/GST essentials