How Much Is VAT in Spain? Rates & Exemptions Explained

Value Added Tax (VAT) in Spain, officially known as Impuesto sobre el Valor Añadido (IVA), functions as a consumption tax applied to most goods and services. This tax is typically incorporated into the final price paid by consumers. Businesses collect IVA on behalf of the Spanish tax authorities at various stages of production and distribution. The specific rate of IVA applied depends directly on the type of product or service being transacted. This system ensures a tax is levied on the value added at each step of the supply chain.

Standard VAT Rate

Spain’s standard IVA rate is 21%. This rate applies to a wide array of goods and services. Most consumer goods fall under this standard application, including clothing, electronics, and general household items. Services such as car repairs, hairdressing, and professional consulting also typically incur the 21% rate. Alcoholic beverages are another common example where the standard IVA rate is applied.

Businesses selling these items or providing these services must charge and remit IVA at this rate. It serves as the default for most commercial activities conducted within the country.

Reduced VAT Rates

Spain applies two reduced IVA rates: 10% and 5%. The 10% reduced rate covers a significant range of goods and services. This includes most foodstuffs, such as meat, fish, and soft drinks. Passenger transport services, including bus, train, and air travel within Spain, are also subject to the 10% rate.

Cultural events and services, like cinema tickets, theater performances, and museum entries, also benefit from the 10% rate. Hotel accommodation, restaurants, and catering services generally fall under this reduced category. Additionally, certain residential construction work and medical equipment for disabled persons are taxed at 10%. The 5% reduced rate applies specifically to electricity and natural gas supplies.

Super Reduced VAT Rate

The super-reduced IVA rate in Spain is 4%. This lowest rate is reserved for goods and services deemed essential for daily life. Basic foodstuffs, such as bread, milk, eggs, fruits, vegetables, and cereals, are taxed at this minimal rate.

Medicines for human use, including prescription and over-the-counter drugs, also fall under the 4% super-reduced rate. Books, newspapers, and magazines, whether in physical or digital format, are another category benefiting from this lowest tax level. Additionally, certain social housing provisions and services for dependent persons are subject to the 4% IVA rate.

VAT Exemptions and Special Regimes

Some transactions in Spain are exempt from IVA. For businesses providing exempt services, this also means they generally cannot deduct the input IVA they paid on purchases related to those services. Common examples of IVA-exempt services include certain financial and insurance services, such as banking transactions and insurance premiums. Educational services, encompassing both public and private schooling, are also typically exempt from IVA.

Medical and health services provided by recognized professionals are usually IVA-exempt. Certain real estate transactions, particularly those involving undeveloped land or second-hand properties, may also be exempt from IVA, though other transfer taxes might apply. Beyond exemptions, Spain also operates “special regimes” for specific sectors or types of transactions. These regimes, such as those for second-hand goods, travel agencies, or agriculture, involve different methods for calculating and applying IVA, deviating from the standard rate application.