The territory of application of the tax extends to the Spanish peninsular territory, the Balearic Islands and the islands adjacent to both territories, as well as the territorial sea up to the limit of 12 nautical miles and the airspace corresponding to said area. It is not applicable in the Canary Islands, and the autonomous cities of Ceuta and Melilla. In the Canary Islands, a tax of a similar nature called 'Impuesto General Indirecto Canario' (IGIC) is applied.

Están sujetas al impuesto las entregas de bienes y prestaciones de servicios realizadas por empresario o profesionales a título oneroso, con carácter habitual u ocasional, en el desarrollo de su actividad empresarial o profesional.

Para igualar la carga tributaria de todas las mercancías, también se someten a gravamen las importaciones tanto de Estados miembros de la Unión Europea, en cuyo caso se denominan adquisiciones intracomunitarias, como las provenientes de terceros estados, denominadas importaciones en el impuesto.

Businessman or professional for VAT purposes

The definition of businessman or professional in this tax differs from that which we can find in other taxes of the Spanish tax system such as the Personal Income Tax (IRPF) or the Corporate Tax (Corporation Tax (Spain)). According to the VAT Law, they will be considered a businessman or professional:.

There is a presumption of the exercise of a business activity since the person who intends to carry out a business announces through circulars, newspapers, posters, signs exposed to the public or in any other way, an establishment that has as its object some commercial operation, in the terms of article 3 of the Commercial Code; as well as being required to contribute to the Tax on Economic Activities for carrying out operations subject to it.

Delivery of goods

The concept of delivery of goods in VAT includes the transmission of the power to dispose of tangible goods, even if it is carried out through the transfer of titles representing said goods.

The rule determines that they will also be considered a delivery of goods:

There are certain operations assimilated to deliveries of goods, the so-called 'self-consumption of goods'. The following operations will be considered self-consumption and, therefore, delivery of goods:

Service provision

The VAT law defines the provision of services in a residual manner, so that subject operations that are not considered the supply of goods will be considered the provision of services.

However, various operations are listed expressly as provision of services:

Intra-community acquisitions

The intra-Community acquisition of goods is defined as obtaining the power to dispose of tangible movable property dispatched or transported to the territory of application of the tax, destined for the acquirer, from another EU Member State, by the transferor, the acquirer himself or a third party in the name and on behalf of any of the above.

Acquisition for consideration by businessmen or professionals or by legal entities that do not act as such is necessary.

Imports

Any entry of products within the territory of the EU is considered an import, as well as those originating from Ceuta, Melilla and the Canary Islands.

La determinación del lugar de realización del hecho imponible delimita el Estado que tiene la potestad de gravar la operación, pretendiendo atribuirla a un solo Estado.[4]​.

Provision of international services

As a general rule, services to businessmen or professionals located in the TAI will be understood to be located at the destination. Likewise, the taxable person will be the recipient businessman or professional if the service provider is not established in the TAI.

Services provided to individuals in the European Union will be understood to be located at origin, that is, at the provider's headquarters. This is excepted when the recipient is an individual established outside the EU and only in certain professional services regulated in article 69.2 of the VAT Law, when it will be understood to be carried out at the headquarters of the individual. The latter will not apply to individuals established in the Canary Islands, Ceuta and Melilla, who will follow the general rule and will be deemed to be located at the provider's headquarters.

With the exception of the general rules indicated above for the provision of international services, the following will be understood to be provided in the TAI.

The standard includes a closing formula by which certain services will be considered provided in the TAI when, in accordance with the applicable location rules, they are not understood to be carried out in the EU, Canary Islands, Ceuta or Melilla, but their effective use or exploitation is carried out in the TAI.

Adquisiciones intracomunitarias

They will be considered carried out in the TAI when the place of arrival of the shipment or transport destined for the purchaser is located there. This will not apply when the purchaser communicates to the transferor a VAT number that does not correspond to the country of arrival.

La ley deja fuera de gravamen determinadas operaciones, por diversas circunstancias; entre las más importantes se encuentran los servicios médicos, determinadas actividades educativas, culturales y deportivas, también las operaciones financieras y de seguro.

Operations not subject to VAT

According to article 7 of the Value Added Tax Law, they are not subject to the tax:.

Exemptions in internal operations

According to article 20 of the aforementioned VAT Law 37/1992, of December 28, the following will be exempt from this tax.

The exemptions relating to numbers 20 and 22 of the previous section may be waived by the taxable person, in the manner and with the requirements determined by regulation, when the purchaser is a taxable person acting in the exercise of his business or professional activities and is granted the right to make a total or partial deduction of the Input Tax when making the acquisition or, when the above is not met, depending on their foreseeable destination, the acquired goods will be used, totally or partially, in carrying out operations, which give rise to the right to deduction.

Types of invoices exempt from VAT

Due to their marked differences, especially with regard to tax treatment and the possibility of deduction, we must distinguish between two types of VAT-exempt invoices: full exemptions and limited exemptions:[5]​.

The accrual of VAT is instantaneous, occurring every time the taxable person carries out the taxable event. In the delivery of goods, accrual occurs when they are made available to the purchaser, while in the provision of services it occurs when they are provided, executed or carried out.

There are certain special rules for when accrual occurs in certain operations:.

Generalmente, el sujeto pasivo es el empresario que efectúa las entregas de bienes o las prestaciones de servicio. Este también es el obligado a presentar las declaraciones y al pago.

Hay cuatro tipos de sujeto pasivo distintos:.

Reversal of the passive subject

The legislator includes certain cases in which the reversal of the taxable person occurs, with the purchaser of the good or recipient of the service being the taxable person in those cases.

La base imponible del Impuesto está constituida por el importe total de la contraprestación de las operaciones sujetas al mismo procedente del destinatario o de terceras personas.

Las siguientes partidas se incluyen en la base imponible del impuesto:.

No se incluyen en la base imponible del impuesto:.

Special rules

There are certain assumptions in article 79 of the VAT Law that includes specific cases of determination of the tax base.

Hasta que en 1993 fue eliminado, existía el "Tipo incrementado". Se aplicaba a objetos de lujo, como aviones privados, yates, obras de arte, joyas, etc. Se aplicaba en España desde el momento de su entrada en la CEE (Comunidad Económica Europea) en 1986, repercutiendo principalmente en las clases altas y muy altas.

Con efectos desde el 01/09/2012 y vigencia indefinida, se distinguen tres tipos impositivos según el bien o servicio de que se trate:[7]​.

Changes in tax rates

The VAT tax rates in Spain,[8][9]​ like in the rest of the European countries, must comply with the provisions of Title VIII of the Tax Directive, which currently establishes that the normal tax rate may not be less than 15 percent (except for some regional exceptions), with no upper limit, although Member States may apply one or two reduced rates, not less than 5 percent, except in the cases of Article 114 of the Directive, in which they may still be smaller ones (among which is the Spanish case). Within these limits, the different Member States have approved different tax rates and, within each country, these have changed to adapt to each historical and economic situation.

The taxable persons of the VAT quotas accrued for the operations carried out in the interior of the country, as well as those borne and accrued in the territory of application of the tax, will be deductible, as long as the goods and services acquired are used in the operations whose execution gives rise to the same;

In order to be entitled to deductions, taxable persons who want to qualify for them must meet certain requirements, which are: being a professional businessman and having started delivering goods or services that are the object of the activity.

However, it is important to highlight that there are certain limits for these deductions, such as deductions in the acquisition of passenger cars, trailers or mopeds, which according to RD 339/1990 are presumed to be applied to 50% of the activity, without prejudice to situations where 100% is applied.

The mechanism of operation is as follows: when the businessman sells, he calculates and invoices his clients for the tax (called output tax) that corresponds to the sales made by applying the tax rate that corresponds to the product sold. When the businessman is going to present his declaration with the fees charged in the corresponding period, he deducts from these the amount of tax that has been passed on to him (supported fees) on all his purchases and therefore enters the difference between them. If the result of the declaration is negative because in the period subject to declaration the contributions borne have been higher than those passed on, the businessman can offset the contributions in subsequent periods, with a limit of four years, or also request their refund.

In this way, in each production phase, only the added value is taxed and at the end of the chain, consumers bear the tax on the final price of the product they consume.

When a taxable person makes deliveries or services with the right to deduction and other similar ones that do not, they will enter into a pro rata situation. There are two types:

Input VAT, that is, the VAT that the company or professional pays when acquiring any goods or certain services, can be divided into two categories of vital importance for the company's accounts: deductible VAT and non-deductible VAT. For VAT to be considered deductible, the following conditions must be met.[10]​.

Retailers who are natural persons are covered by the special regime for equivalence surcharge as long as they do not manipulate or intervene in the production process of the products they sell, that 80% of their sales are to the final consumer and that their heading in the IAE allows it.

In this case, the retailer does not have to make VAT settlements because he will have already paid it previously to the supplier through a special surcharge for his purchases, 5.2% for products with a rate of 21%, 1.4% for products with a rate of 10% and 0.5% for products with a rate of 4%.

The territory of application of the tax extends to the Spanish peninsular territory, the Balearic Islands and the islands adjacent to both territories, as well as the territorial sea up to the limit of 12 nautical miles and the airspace corresponding to said area. It is not applicable in the Canary Islands, and the autonomous cities of Ceuta and Melilla. In the Canary Islands, a tax of a similar nature called 'Impuesto General Indirecto Canario' (IGIC) is applied.

Están sujetas al impuesto las entregas de bienes y prestaciones de servicios realizadas por empresario o profesionales a título oneroso, con carácter habitual u ocasional, en el desarrollo de su actividad empresarial o profesional.

Para igualar la carga tributaria de todas las mercancías, también se someten a gravamen las importaciones tanto de Estados miembros de la Unión Europea, en cuyo caso se denominan adquisiciones intracomunitarias, como las provenientes de terceros estados, denominadas importaciones en el impuesto.

Businessman or professional for VAT purposes

The definition of businessman or professional in this tax differs from that which we can find in other taxes of the Spanish tax system such as the Personal Income Tax (IRPF) or the Corporate Tax (Corporation Tax (Spain)). According to the VAT Law, they will be considered a businessman or professional:.

There is a presumption of the exercise of a business activity since the person who intends to carry out a business announces through circulars, newspapers, posters, signs exposed to the public or in any other way, an establishment that has as its object some commercial operation, in the terms of article 3 of the Commercial Code; as well as being required to contribute to the Tax on Economic Activities for carrying out operations subject to it.

Delivery of goods

The concept of delivery of goods in VAT includes the transmission of the power to dispose of tangible goods, even if it is carried out through the transfer of titles representing said goods.

The rule determines that they will also be considered a delivery of goods:

There are certain operations assimilated to deliveries of goods, the so-called 'self-consumption of goods'. The following operations will be considered self-consumption and, therefore, delivery of goods:

Service provision

The VAT law defines the provision of services in a residual manner, so that subject operations that are not considered the supply of goods will be considered the provision of services.

However, various operations are listed expressly as provision of services:

Intra-community acquisitions

The intra-Community acquisition of goods is defined as obtaining the power to dispose of tangible movable property dispatched or transported to the territory of application of the tax, destined for the acquirer, from another EU Member State, by the transferor, the acquirer himself or a third party in the name and on behalf of any of the above.

Acquisition for consideration by businessmen or professionals or by legal entities that do not act as such is necessary.

Imports

Any entry of products within the territory of the EU is considered an import, as well as those originating from Ceuta, Melilla and the Canary Islands.

La determinación del lugar de realización del hecho imponible delimita el Estado que tiene la potestad de gravar la operación, pretendiendo atribuirla a un solo Estado.[4]​.

Provision of international services

As a general rule, services to businessmen or professionals located in the TAI will be understood to be located at the destination. Likewise, the taxable person will be the recipient businessman or professional if the service provider is not established in the TAI.

Services provided to individuals in the European Union will be understood to be located at origin, that is, at the provider's headquarters. This is excepted when the recipient is an individual established outside the EU and only in certain professional services regulated in article 69.2 of the VAT Law, when it will be understood to be carried out at the headquarters of the individual. The latter will not apply to individuals established in the Canary Islands, Ceuta and Melilla, who will follow the general rule and will be deemed to be located at the provider's headquarters.

With the exception of the general rules indicated above for the provision of international services, the following will be understood to be provided in the TAI.

The standard includes a closing formula by which certain services will be considered provided in the TAI when, in accordance with the applicable location rules, they are not understood to be carried out in the EU, Canary Islands, Ceuta or Melilla, but their effective use or exploitation is carried out in the TAI.

Adquisiciones intracomunitarias

They will be considered carried out in the TAI when the place of arrival of the shipment or transport destined for the purchaser is located there. This will not apply when the purchaser communicates to the transferor a VAT number that does not correspond to the country of arrival.

La ley deja fuera de gravamen determinadas operaciones, por diversas circunstancias; entre las más importantes se encuentran los servicios médicos, determinadas actividades educativas, culturales y deportivas, también las operaciones financieras y de seguro.

Operations not subject to VAT

According to article 7 of the Value Added Tax Law, they are not subject to the tax:.

Exemptions in internal operations

According to article 20 of the aforementioned VAT Law 37/1992, of December 28, the following will be exempt from this tax.

The exemptions relating to numbers 20 and 22 of the previous section may be waived by the taxable person, in the manner and with the requirements determined by regulation, when the purchaser is a taxable person acting in the exercise of his business or professional activities and is granted the right to make a total or partial deduction of the Input Tax when making the acquisition or, when the above is not met, depending on their foreseeable destination, the acquired goods will be used, totally or partially, in carrying out operations, which give rise to the right to deduction.

Types of invoices exempt from VAT

Due to their marked differences, especially with regard to tax treatment and the possibility of deduction, we must distinguish between two types of VAT-exempt invoices: full exemptions and limited exemptions:[5]​.

The accrual of VAT is instantaneous, occurring every time the taxable person carries out the taxable event. In the delivery of goods, accrual occurs when they are made available to the purchaser, while in the provision of services it occurs when they are provided, executed or carried out.

There are certain special rules for when accrual occurs in certain operations:.

Generalmente, el sujeto pasivo es el empresario que efectúa las entregas de bienes o las prestaciones de servicio. Este también es el obligado a presentar las declaraciones y al pago.

Hay cuatro tipos de sujeto pasivo distintos:.

Reversal of the passive subject

The legislator includes certain cases in which the reversal of the taxable person occurs, with the purchaser of the good or recipient of the service being the taxable person in those cases.

La base imponible del Impuesto está constituida por el importe total de la contraprestación de las operaciones sujetas al mismo procedente del destinatario o de terceras personas.

Las siguientes partidas se incluyen en la base imponible del impuesto:.

No se incluyen en la base imponible del impuesto:.

Special rules

There are certain assumptions in article 79 of the VAT Law that includes specific cases of determination of the tax base.

Hasta que en 1993 fue eliminado, existía el "Tipo incrementado". Se aplicaba a objetos de lujo, como aviones privados, yates, obras de arte, joyas, etc. Se aplicaba en España desde el momento de su entrada en la CEE (Comunidad Económica Europea) en 1986, repercutiendo principalmente en las clases altas y muy altas.

Con efectos desde el 01/09/2012 y vigencia indefinida, se distinguen tres tipos impositivos según el bien o servicio de que se trate:[7]​.

Changes in tax rates

The VAT tax rates in Spain,[8][9]​ like in the rest of the European countries, must comply with the provisions of Title VIII of the Tax Directive, which currently establishes that the normal tax rate may not be less than 15 percent (except for some regional exceptions), with no upper limit, although Member States may apply one or two reduced rates, not less than 5 percent, except in the cases of Article 114 of the Directive, in which they may still be smaller ones (among which is the Spanish case). Within these limits, the different Member States have approved different tax rates and, within each country, these have changed to adapt to each historical and economic situation.

The taxable persons of the VAT quotas accrued for the operations carried out in the interior of the country, as well as those borne and accrued in the territory of application of the tax, will be deductible, as long as the goods and services acquired are used in the operations whose execution gives rise to the same;

In order to be entitled to deductions, taxable persons who want to qualify for them must meet certain requirements, which are: being a professional businessman and having started delivering goods or services that are the object of the activity.

However, it is important to highlight that there are certain limits for these deductions, such as deductions in the acquisition of passenger cars, trailers or mopeds, which according to RD 339/1990 are presumed to be applied to 50% of the activity, without prejudice to situations where 100% is applied.

The mechanism of operation is as follows: when the businessman sells, he calculates and invoices his clients for the tax (called output tax) that corresponds to the sales made by applying the tax rate that corresponds to the product sold. When the businessman is going to present his declaration with the fees charged in the corresponding period, he deducts from these the amount of tax that has been passed on to him (supported fees) on all his purchases and therefore enters the difference between them. If the result of the declaration is negative because in the period subject to declaration the contributions borne have been higher than those passed on, the businessman can offset the contributions in subsequent periods, with a limit of four years, or also request their refund.

In this way, in each production phase, only the added value is taxed and at the end of the chain, consumers bear the tax on the final price of the product they consume.

When a taxable person makes deliveries or services with the right to deduction and other similar ones that do not, they will enter into a pro rata situation. There are two types:

Input VAT, that is, the VAT that the company or professional pays when acquiring any goods or certain services, can be divided into two categories of vital importance for the company's accounts: deductible VAT and non-deductible VAT. For VAT to be considered deductible, the following conditions must be met.[10]​.

Retailers who are natural persons are covered by the special regime for equivalence surcharge as long as they do not manipulate or intervene in the production process of the products they sell, that 80% of their sales are to the final consumer and that their heading in the IAE allows it.

In this case, the retailer does not have to make VAT settlements because he will have already paid it previously to the supplier through a special surcharge for his purchases, 5.2% for products with a rate of 21%, 1.4% for products with a rate of 10% and 0.5% for products with a rate of 4%.