Handmade embroidery will be taxed at 21% VAT unless they are works of art

The tax classification of artisanal activities is decisive for the correct settlement of taxes. Recently, the Dirección General de Tributos (DGT) has specified the treatment of VAT applicable to the making of handmade embroidery, establishing a key distinction based on the nature of the final product.

What the DGT has resolved

The ruling addresses the correct classification in the Impuesto de Actividades Económicas (IAE) and the VAT tax rate applicable to the sale of hand-made embroidery. The binding body determines that this activity must be registered under heading 455.9 of Section 1 of the IAE.

Regarding Value Added Tax (IVA), the resolution establishes that the supplies of these goods are subject to the general rate of 21%. However, a technical exception is opened: if the embroidery meets the specific requirements to be considered a work of art, as provided in Article 136 of the IVA Law, the reduced rate of 10% may be applied.

What it means for you

If you carry out artisanal activities or manual textile manufacturing, you must take into account that the general rule is the application of the 21% tax rate. This directly affects the final sale price and the management of your invoices.

The possibility of applying the 10% rate is neither automatic nor discretionary. It depends strictly on the piece being considered a work of art under current regulations. This implies that it is not enough for the work to be manual or require skill; it must fit the legal definition of a work of art.

What should be done

It is necessary to analyze the nature of each product marketed to determine its tax treatment. In the event that the reduced 10% rate is intended to be applied, the piece must meet the requirements demanded by the IVA Law to be categorized as a work of art.

Given that the classification of a work of art can be subject to controversy before the Administration, it is fundamental to assess each case individually to avoid errors in the tax settlement.