In this guide by Accompany, we explain everything foreign companies operating in Spain need to know about Value Added Tax (VAT — known in Spain as IVA, Impuesto sobre el Valor Añadido): from the three current VAT rates and the products and services each one covers, to how VAT is collected and deducted, when the reverse charge mechanism applies, how intra-EU transactions work, and what your Spanish SL must file with the AEAT.
Whether you are a European entrepreneur who has incorporated a Spanish SL, a director managing invoicing to Spanish and EU clients, or a foreign company trying to understand when to charge VAT, when not to, and what returns you need to file — getting VAT right from day one is essential to protect your deductibility position, avoid retrospective AEAT adjustments, and ensure your invoices are legally valid in Spain.VAT (IVA in Spanish) is an indirect consumption tax administered by the Agencia Estatal de Administración Tributaria (AEAT).
It applies to the sale of goods and services in Spain and is collected at each stage of the supply chain. As a business, your Spanish SL acts as an intermediary: you collect VAT from your clients, deduct the VAT you have paid on your own purchases, and remit the net amount to the AEAT on a quarterly or monthly basis.
For a broader understanding of taxation in Spain, you might find our general guide on Taxes in Spain helpful.
What is Value-Added Tax (VAT)?
Is the main form of indirect tax placed on goods and services, which means it affects the final price of virtually everything you will buy or use in Spain. Understanding this complex type of tax is anything but simple—so, if you want to know how VAT works, who must pay it, and the different VAT rates that apply in Spain, then this article is for you.
How VAT Works in Spain
VAT is a tax collected by the Spanish tax office on both the items we buy and services we use. Companies and service providers are required to charge VAT to the customer but do not keep it; each quarter, they must pay what they have accumulated to the Spanish tax office. However, businesses that charge VAT can also deduct their input VAT—the VAT they pay as part of their expenses—when they file tax returns. This means they can subtract the VAT paid on supplies and services from what they owe the tax office.
Who Pays VAT?
Although VAT is charged on what both individuals and companies consume, it is ultimately only paid by individuals. This is because companies and the self-employed play two roles—they collect VAT every time they make a sale, and they pay VAT on what they purchase from their suppliers. When the amount of VAT they charge is more than the VAT they paid on their purchases, the company owes the government money. Alternatively, if the company has paid more VAT than it has received, it can claim a refund from the tax office. In this way, companies function as intermediaries—or passive taxpayers—for the VAT that consumers pay.
What VAT Rates Apply in Spain?
General VAT — 21%
This is the most common of the three VAT rates and is applied by default to all goods and services not subject to reduced or super-reduced VAT rates. The general rate is 21% and applies to the vast majority of commercial transactions: professional services, technology, clothing, vehicles, alcoholic beverages, and most B2B supplies. This is the rate your Spanish SL will charge on most of its invoices to Spanish clients.
Reduced VAT — 10%
Just like general VAT, the reduced value-added tax is levied on the consumption of goods and services—albeit at a lower rate, 10%, than the general one. The reduced rate applies to the following products and services: Products used for producing human food and animal feed, cultural activities, public transportation, etc. Other key examples at 10%: hotel and restaurant services, certain medical products, and home renovation services. Seed oils and pasta returned to 10% from 1 January 2025, following the end of the temporary crisis-reduction measures.
Super-reduced VAT — 4%
At 4%, the super-reduced VAT rate is the lowest value-added tax charged on products. It is mainly used to tax goods considered by law as basic necessities like essential foods—including bread and bread flours, eggs, fruits and vegetables, grains, pharmaceutical drugs for human use, etc. Note: basic foodstuffs (bread, milk, eggs, fruit, vegetables, cereals) returned to 4% from 1 January 2025, up from the temporarily reduced 2% rate that applied during 2023–2024 as an anti-inflation measure. Olive oil also returned to 4% from the same date.
0% Rate and Territorial Exceptions
A 0% rate applies to certain specific transactions, including the intra-Community supply of goods (exports to EU businesses) and international exports outside the EU. These are technically VAT-exempt with the right to deduct input VAT — meaning the seller does not charge VAT but can recover the VAT paid on purchases related to those sales.
Important territorial note: standard Spanish VAT (IVA) applies only in mainland Spain and the Balearic Islands. The Canary Islands, Ceuta, and Melilla have their own separate tax regimes (IGIC in the Canary Islands, IPSI in Ceuta and Melilla) and are treated as third territories for VAT purposes — not as part of the EU VAT area. Foreign companies supplying to or from these territories must apply different rules.
VAT-Exempt Products and Services
Certain services and products are not subject to value-added taxes in Spain, including financial and savings products and insurance, education in public schools and authorized private schools, vocational training, private tutoring and language classes, healthcare services provided by medical professionals.
VAT exemption in Spain has two distinct categories with very different implications for your business:
- Full exemption with right to deduct (exención plena): applies to exports and intra-EU supplies. The seller does not charge VAT but can fully recover input VAT on purchases related to those sales. This is the most favourable category.
- Limited exemption without right to deduct (exención limitada): applies to financial services, insurance, education, and healthcare. The supplier does not charge VAT but also cannot deduct the input VAT on purchases related to those exempt activities. For foreign companies with mixed activities (partly exempt, partly taxable), a pro-rata calculation determines the deductible portion.
When to Apply VAT?
The B2B rule locates the transaction where the business customer is located. In case the customer is a private individual, B2C rules locate the transaction where the supplier is located. According to the general B2B rule, any business not established in Spain supplying services to a Spanish registered customer will not charge any VAT and the transaction will be reverse charged by the customer.
There are however a number of exceptions to this rule. Where these exceptions apply, reverse charge is still applicable in Spain like Services connected to immoveable property are located where the property is located, passenger transport services will be located where the transport takes places (apportioned if necessary).
VAT Registration in Spain for Foreign Companies
One of the most common compliance gaps for foreign companies operating in Spain is not registering for VAT at the right time. Unlike some EU member states, Spain does not operate a general VAT registration threshold for non-resident businesses: if you make a single taxable supply in Spain — a goods delivery from a local warehouse, an on-site service, or certain B2C digital supplies — you are, in principle, required to register from that first transaction.
Registration is done via Modelo 036, filed with the AEAT. For foreign companies, this typically requires:
- Company registration documents (apostilled or legalised where required).
- Proof of VAT registration in the country of establishment.
- Articles of association.
- Appointment of a fiscal representative in Spain (required for non-EU companies; advisable for EU companies).
Once registered, your Spanish SL must comply with ongoing VAT filing obligations (see section on VAT returns below). Retrospective AEAT adjustments for companies that should have registered earlier can include unpaid VAT, denial of input VAT recovery, and penalties.
OSS: One-Stop Shop for EU B2C Distance Sales
If your company sells goods or digital services to private consumers (B2C) across multiple EU countries, the One-Stop Shop (OSS) mechanism may allow you to avoid registering for VAT in each country separately. The EU-wide threshold is €10,000 per year in cross-border B2C sales (replacing the previous country-by-country thresholds since July 2021). Below this threshold, you may charge VAT at your own country’s rate; above it, destination-country VAT applies.
OSS does not remove the need for local Spanish VAT registration when you store goods in Spain, employ staff, or carry out taxable activities with a fixed establishment in Spain. If your Spanish SL has a local warehouse or operational premises, OSS is not a substitute for standard IVA registration and Modelo 303 filing.
Reverse Charge
Where a non-established supplier sells goods to a taxable person, domestic reverse charge applies. It is not relevant if the supplier is registered or not. Regarding the customer, it is not relevant if it is established or VAT registered. Even when the customer is not VAT registered, reverse charge applies, hence requiring this customer to register and account for VAT.
For services, however, domestic reverse charge would only apply where a) the supplier is not established, b) the service is located in Spain according to the exceptions to the B2B rule (e.g., admission to events, land related, etc.) and the c) the customer is established in Spain for VAT purposes.
Practical implication for your Spanish SL: when you receive services from a non-Spanish EU supplier (e.g., software, consulting, advertising), you will typically receive an invoice with 0% VAT. You must self-assess the Spanish VAT via the reverse charge mechanism — declaring both the output VAT (as if you had charged it) and the input VAT (as a deductible expense) in the same Modelo 303 return. In most cases these cancel out, making the mechanism VAT-neutral. However, the declaration must still be made correctly or it constitutes a reporting error.
What is the ROI / VIES?
The VIES is an electronic means of transmitting information relating to the VAT registration (=validity of VAT numbers) of businesses registered in the EU. Information on intra-Community (tax-exempt) supplies between Member State administrations is also transmitted via VIES.
The Register of intra-Community operators is made up of persons or entities that have been assigned a Spanish VAT number (NIF-IVA):
- Entrepreneurs or professionals who conduct intra-Community supplies or acquisitions of goods subject to Spanish VAT.
- Entrepreneurs or professionals who carry out intra-Community acquisitions of services in respect of which they are taxable persons, by inversion, and entrepreneurs and professionals who conduct intra-Community supplies of services taxed in the Member State of destination when the taxable person is the recipient of such supplies.
In order to make an intra-Community supply without charging VAT you must ensure that the person to whom you are supplying the goods is a taxable person in another Member State and that the goods in question have left or will leave your Member State of origin for another Member State. It is also necessary for the VAT number to appear on the invoice.
Important: having a Spanish NIF does not automatically enrol your company in the ROI. Registration must be requested separately via Modelo 036. Until the ROI registration is active, you cannot validly issue zero-rated intra-Community invoices. AEAT can delay activation if the file lacks evidence of genuine trading activity — submitting supporting documentation (contracts, purchase orders, pro-forma invoices) alongside the Modelo 036 reduces this risk significantly.
Special Regime: Recargo de Equivalencia
The equivalence surcharge is a special VAT regime, which is compulsory for retailers who do not carry out any kind of transformation of the products they sell, i.e., for self-employed traders who sell to the final customer. It applies to both self-employed individuals and communities of goods.
Note: this regime applies exclusively to self-employed retailers (autónomos) selling to end consumers. It does not apply to Spanish SLs or to the foreign company clients that Accompany works with. It is included here for reference only, as suppliers subject to this regime will charge it on invoices you receive.
In addition, 80% of total sales in the previous year must be to final consumers, i.e., private individuals who are not professionals or entrepreneurs. There are two exceptions to this condition:
- If the retailer has not conducted any commercial activity in the previous year.
- If the trader is taxed by objective direct estimation, i.e., modules.
Suppliers charge you the corresponding VAT plus the equivalence surcharge separately on your invoice at the following rates:
- 5.2% for items that are subject to VAT at the standard rate of 21%.
- 1.4% for items that are subject to VAT at the reduced rate of 10%.
- 0.5% for items subject to VAT at the reduced rate of 4%.
- 1.75% for tobacco.
VAT Refunds
If the VAT charged exceeds the amount of deductible VAT, the taxable person must pay the difference in their periodic (monthly or quarterly) returns. If, conversely, deductible VAT exceeds the VAT charged, the taxable person may request a refund of the excess, typically claimable in the last return for the year.
However, businesses registered on the Monthly Refund Register may claim a refund of the balance at the end of each assessment period, provided certain regulatory requirements are met. This registration obliges them to file monthly VAT returns electronically and keep electronic VAT registers.
The period for obtaining a refund is generally six months from the end of the filing period for the last return of the year (January 30 of the following year), or from the end of the period for filing monthly returns for those on the Monthly Refund Register.
How Accompany Manages VAT Compliance for Foreign Companies
VAT compliance in Spain involves more than filing a quarterly return. For foreign companies with a Spanish SL, the obligations extend to ROI registration, intra-EU invoice validation, reverse charge self-assessment, Modelo 349 filings, and — where applicable — SII or OSS reporting. Each of these has its own deadlines, format requirements, and AEAT cross-check exposure.
At Accompany, we manage the full VAT compliance cycle for the foreign companies we work with:
- Initial VAT and ROI registration via Modelo 036, with supporting documentation to minimise activation delays.
- Quarterly Modelo 303 preparation and filing, reconciled against your accounting records.
- Annual Modelo 390 summary and Modelo 349 intra-EU statement.
- Reverse charge review: we verify that all incoming invoices from non-established suppliers are correctly self-assessed.
- Intrastat filing where thresholds are met.
- Proactive advice on VAT rate changes and exemption conditions as they affect your specific transactions.
For a detailed review of your company’s VAT position in Spain, contact Accompany. We work exclusively with international companies and their teams.
