VAT in Spain (IVA — Impuesto sobre el Valor Añadido)

What Is IVA?

IVA (Impuesto sobre el Valor Añadido) is Spain’s value-added tax, equivalent to VAT in the UK, TVA in France, or MwSt in Germany. It is an indirect tax charged at each stage of the supply chain, with the final consumer bearing the full economic cost. Businesses act as collectors on behalf of the Spanish Tax Agency (AEAT): they charge IVA on their sales (output tax) and recover IVA paid on their purchases (input tax), remitting only the net difference.

IVA Rates

Spain applies three positive rates and one zero rate:

Note: Some services are VAT-exempt without recovery rights (healthcare, education, financial services), meaning providers cannot recover input IVA on related costs — an important factor for business model planning.

VAT Registration

There is no registration threshold in Spain for businesses established in Spain: any entity conducting economic activity must register for IVA from the outset, regardless of turnover. This contrasts with the UK (£90,000 threshold) or Germany (EUR 22,000 threshold) and is a common surprise for foreign entrepreneurs.

Non-established businesses supplying goods or services to Spanish customers may also need to register, depending on the nature of the supply and whether a reverse-charge mechanism applies.

How IVA Works in Practice

1. Issue sales invoices with IVA charged at the applicable rate.
2. Collect IVA on purchases — retain all valid invoices to support input tax claims.
3. File quarterly returns (Modelo 303) — see the dedicated Modelo 303 glossary entry.
4. Annual summary — Modelo 390 summarises all quarterly figures for the year.
5. Third-party transactions — Modelo 347 reports transactions with any counterparty exceeding EUR 3,005.06 in the year.

Intra-EU and International Transactions

• Intra-EU supplies of goods: Zero-rated if the buyer is VAT-registered in another EU member state (verified via VIES). The seller must file Modelo 349.
• Intra-EU acquisitions: The Spanish buyer self-accounts for IVA (reverse charge).
• Services: The place-of-supply rules determine which country’s VAT applies. B2B services generally follow the customer’s country; B2C services depend on the service type.
• Exports: Zero-rated; full input tax recovery available.
• Imports: IVA is payable at customs (or deferred under certain regimes).

The SII System

Companies with annual turnover above EUR 6 million, VAT groups, and companies registered in the REDEME (Monthly VAT Refund Register) must use the SII (Suministro Inmediato de Información) — an electronic real-time invoicing data submission system. Under SII, invoice data must be uploaded to the AEAT within four business days of issue or receipt. Companies under SII benefit from extended filing deadlines but face heightened compliance requirements.

Common Pitfalls for Foreign Companies

• No registration threshold: Foreign companies often assume they do not need to register immediately — they do.
• Proforma invoices: Only valid invoices (facturas) support input tax recovery; proformas and quotes do not.
• Bad debts: IVA on unpaid invoices can be recovered, but strict procedures and timeframes apply.
• Mixed-use businesses: If a business makes both taxable and exempt supplies, input tax must be apportioned using the prorrata method.

How BMC Can Help

Our tax team manages the complete IVA compliance cycle: from initial registration and structuring advice through quarterly Modelo 303 preparation, SII compliance, and representation in AEAT VAT inspections.