Value Added Tax (VAT) in Spain, known as IVA (Impuesto sobre el Valor Añadido), is a consumption tax applied to most goods and services. Here's everything you need to know about how it works and who needs to pay it.

VAT Declaration Systems in Spain

There are three main ways to declare VAT in Spain:

1. Direct Assessment: Businesses calculate VAT by subtracting deductible expenses from total profits before applying the appropriate VAT rate. The amount varies based on business performance.

2. Module-based Assessment: A simplified system using tax office estimations rather than actual expenses. Requires registration and quarterly filing of tax form 131.

3. Cash Basis: Available for companies with annual turnover under €2 million. VAT is paid when payment is received rather than when services are provided.

Spanish VAT Rates

• General VAT (21%): Applies to most goods and services including gyms, clothing, and appliances
• Reduced VAT (10%): Food products, water, public transport, and hospitality services
• Super-reduced VAT (4%): Essential items like bread, fruits, vegetables, housing, and medical products
• VAT-exempt: Healthcare services, postage stamps, and financial products

Requirements for VAT Deduction

To deduct VAT, businesses must:

• Submit purchase invoices to relevant companies
• Maintain detailed records in the investments and expenses ledger
• Prove business-related expenditure through documentation of social security, payroll, rent, or taxes

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