Taxes And Invoicing In Spain

Published on 16/02/2010 in Taxes in Spain

When doing business in Spain, it’s vital to understand the processes of invoicing and what taxes you are liable to pay. Here’s an overview of these critical areas for people working in Spain. 

TaxElements of an Invoice

Spanish legislation states that an invoice should include all of the following:

  • Full details of the supplier and customer i.e. The personal or company details including; First Name and Surname or Company name, Address, NIE number for an individual or CIF number and Mercantile details for a company
  • Date
  • Sequentially numbered reference which should follow the date order
  • Amount chargeable for goods of services
  • Breakdown of VAT if applicable
  • Deduction for withholding tax (IRPF) if applicable

We also recommend that you take the opportunity to state your terms and conditions on your invoice such as method of payment and credit terms.

Invoices acceptable for tax purposes

Only invoices or credit notes that meet the requirements noted above are valid for claiming tax relief and VAT refunds. The following proofs of purchase are not acceptable for tax purposes:

    * Delivery notes (Albaranes)
    * Receipts (Tickets)
    * Orders (Pedidos)
    * Quotations (Presupuestos)
    * Draft invoice (Factura Proforma)

All suppliers are obliged by law to provide you with a proper invoice on request. This includes supermarkets, restaurants, and other entities that usually give receipts. You may ask for an invoice at the time of purchase, or request one later on by presenting your tickets.

Taxes in Spain

Make sure you are aware of how the tax system operates in Spain so you can make informed decisions regarding your business and personal taxes. Here is an overview of the key taxes which may affect you whilst living or doing business in Spain.

Value Added Tax

The general rate of VAT is 16% which is charged on most supplies. There is also a reduced rate for certain products and services of 7% and 4%. However, the government has just announced an increase in this tax for next year to 18% for general rate and 8% and 4% for the reduced rates, so ensure you know when the change takes place.

Registration with the tax office is compulsory for companies or individuals selling products of services which fall within the scope of this tax. It is important to point out that, unlike in some countries, businesses supplying goods or services subject to VAT must register from commencement of trade, as there is no lower threshold limit.

Income Tax

This tax arises when individuals have any the following sources of income:

    * Employment
    * Current assets (interest, dividends, etc)
    * Property (rentals)
    * Economic activities (business profits)
    * Capital Gains
    * Deemed income (on the benefits derived from certain assets)

At present, residents are taxed at a maximum of 18% on certain types of income such as savings income and capital gains. On the remaining sources of income the minimum tax rate is 24% and the maximum is 43%. Some increases to these rates are currently planned by the government to such as raising the rate applicable to savings to 20%.

Resident taxpayers are entitled to a minimum personal allowance of €5,150. This amount increases after the taxpayer reaches the age of 65. Further allowances can be claimed for dependants.

Other deductions may also be available. It is worth noting that a deduction may be made for the amounts paid for the purchase of your main residence, amounting to 15% of the amount invested up to a limit of €9,015 per year. This also applies to the amounts paid in relation to the mortgage obtained when acquiring the house.

Payments on account may be required for sole traders and the total income tax for each calendar year is due by 30th June of the following year. 40% of the remaining payment due may be postponed until the following November.

Corporation Tax

Taxable profits generated by companies are liable to corporation tax. The standard rate for 2009 is 32.5%. However, the taxable profits of companies with a turnover below €8 million are taxed at 25% for the first €120.202 and at 30% for the remainder of the profits. Please note, this tax will also be affected by the temporary reform planned by the Government which will include considerable reductions for businesses meeting certain targets such as increasing or maintaining their number of employees.

Payments on account may be required and the total of the corporation tax charge is due within the six months and 25 days after the end of the financial year.

Stamp Duty

Taxable transfers of buildings and land are taxed at the rate of 7%, and other items are taxable at a lower rate. First transfers of property from the developer are subject to VAT instead of stamp duty at 7% for buildings and 16% for land.

Stamp Duty also arises at the rate of 1% on share capital, either at the incorporation stage or when share capital increases are made.

Inheritance and gift Tax

This tax arises when individuals receive an inheritance or a life time gift. The tax payable depends on the wealth of the recipient as well as on the value of the transfer. The impact of this tax is considerably less on residents given the reliefs available, so non-residents beware!

Local Taxes on Property

In addition to the above there is council tax due on the ownership of urban property. This tax is calculated on the rateable value of the property (valor catastral) and the rates range between 0.4% and 1.3%. 

Local tax also arises when the property is sold, this charge considers the rateable value increase during the period of ownership.

Local Taxes on Businesses

Business rates may also be payable to the local authorities. However, at the present time small and medium sized companies are exempt from this tax.

It is always advisable to seek professional advice when entering into certain transactions either as a private individual or a business person. Similarly, being non resident does not exclude one from many of the aforementioned tax-traps, and therefore anyone planning to acquire any assets in Spain should likewise seek professional advice at the earliest opportunity.

Written by: Susana Serrano-Davey ACA

About the author:

Rose & Clavel Anglo-Spanish Chartered Accountants – Setting the standards for Chartered Accountancy on the Costa del Sol

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Susana Serrano-Davey said:
23 February 2010 @ 20:14

Pauline, if you are not Spanish resident, just by being a property owner, even if you don't rent it out you should file an annual "non-residents" return. This is a self-assessment return so if you want to be fully compliant with your obligations with the tax office you should take the necessary action to ensure a professional does this for you. You may be able to find a solicitor or accountant local to where you are who can do this for you.

Susana Serrano-Davey said:
23 February 2010 @ 20:10

Richard, your spanish assets will be liable to spanish inheritance tax when the time comes. Inheritance tax will affect the surviving partner if the property was owned 50:50 as effectively half of the house is inherited. Your children will be liable to IHT whether they are resident or not.

PaulineW said:
17 February 2010 @ 12:35

Hi, we have recently purchased an apartment at Corvera. Although we are not renting it out, certainly not this year, are we likely to be eligible to pay tax for the privilage of owning this property.

Richard said:
16 February 2010 @ 21:13

Thank you very much for this advice. Although I hope Inheritance tax is some way off, how does it affect surviving partners? And can we account for the tax when we want to pass it on to our children if they are not spanish residents?

Susana Serrano-Davey said:
16 February 2010 @ 19:05

Sharon you are quite right, as from the first of July 2010 the rate of VAT will increase. This is part of a wide reform which affects corporation tax and income tax, editing point to be followed up! Thanks

sharonw said:
16 February 2010 @ 18:08

Hi, I think the VAT increase takes place from July this year! ?

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