IVA tips for Spanish businesses

A good proportion of the queries we get from our Spanish business and autonomo clients concern IVA (Impuesto sobre el Valor Anadido) or VAT as we call it in Britain. The system operates much the same as it does in the UK: you charge VAT on your sales and hand it over once a quarter to the tax office but first of all you deduct the VAT you have had to pay on your costs.

Simples, says the meerkat?

At its most basic it is simple, but it doesn't take long before complications arise. Here are some of the things that have come up during the last year:

Declaration thresholds: There aren't any in Spain unlike the UK where small businesses can get out of charging VAT altogether.

IVA exemptions: the only Spanish businesses that don't charge IVA are those making exempt supplies, such as those relating to education, culture, sport and insurance.

Reduced rate IVA: the general rate of IVA is 16% (due to rise to 18% on July 1st). But there are two reduced rates - 7% (will rise to 8%) for things like airline tickets, restaurants and hotels and 4% for food, books, newspapers and medicines.

Costs exceeding income: can you get your IVA back? Sometimes, but not right away. If, during a particular quarter, you have paid more IVA out on your costs than you've charged on your income, you will not have to pay anything over to the tax office but they won't pay you the excess. Instead you carry the difference forward to the next quarter and claim it against IVA charged on your income then. If you get to the end of the year still in excess (i.e. you've made a loss) then you can reclaim it.

Reclaiming IVA if you don't charge it: if you pay IVA on your costs but don't charge it on your sales (e.g. because they are exempt or exported) then you can't reclaim the IVA you have suffered.

Exemption from making quarterly declarations: you do not have to declare if you have no IVA on your sales because of exemptions

Invoicing abroad: You don't have to charge IVA on exports of goods but you sometimes do on services. If you are invoicing a non-business customer (i.e. one without a VAT number in their own country) you do charge IVA, but you don't if it's a business customer. That's a general rule and there are exceptions - see this explanation Invoicing to and from Spain - New VAT rules

Getting IVA back on your expenses: You can only recover IVA with a proper invoice made out to you with your company or autonomo CIF (id) number on it. You will have to request a proper invoice from the provider of the service. EG if you are in a shop or garage ask for a factura and they should give you a proper one as opposed to a receipt.

For more information about the different rates of IVA that apply in Spain: Spanish IVA rates

For more tips like this check out the Advoco website, for example the autonomo guide:

http://www.advoco.es/home/22-latest/43-guide-to-spains-autonomo-system.html