After the reform to tax law and specifically IVA in 2010 and after the increases in 2012 in IVA rates in Spain, there are three types of Value Added Taxes: General IVA at 21%, Reduced IVA% at 10% and the Super-reduced IVA at 4%.
Below is an explanation of each type of IVA.
What is IVA?
IVA or VAT in Britain, means Value Added Tax, and it is an indirect tax that is intended to tax the consumption of any product or service. Unlike the Personal Income Tax, IVA is not applied directly on the taxpayer’s income, but on consumer goods through manufacturing and distribution phases. This affects the ultimate price paid by the consumer.
The Components of IVA
We can divide IVA into three parts:
- The taxable amount, which is the total amount paid in any transaction and is subject to the tax;
- The tax rate, which is a percentage applied to every transaction amount that is subject to the tax, in order to determine the amount said tax; and
- The IVA rate itself, which results from applying the tax rate to the original tax base amount.
What kinds of IVA rates are there?
The General Rate of IVA
The General Rate of IVA is 21%. This applies to all transactions subject to IVA that are carried out since 1 September 2012, unless the reduced or super-reduced rates apply.
The Reduced Rate of IVA
Rate Reduced to 10%. It applies to:
Delivery, intra-Community acquisitions or imports, mainly of the following goods:
- Foods used for human or animal nutrition, not including alcoholic beverages. As well as animals, plants and other products used to obtain food.
- Employees in agricultural, forestry or livestock activities (seeds, fertilizers, insecticides, herbicides, etc.)
- Water for human or animal feed or for irrigation.
- Appliances and accessories, including prescription glasses and contact lenses, intended to compensate for the physical deficiencies of man or animals. Medical devices, material, equipment or instruments used to prevent, diagnose, treat, relieve or cure diseases or ailments of man or animals.
- Housing, including parking spaces and annexes.
The reduced rate also applies to the provision, inter alia, of the following services:
- The transport of passengers and their luggage.
- Hospitality, camping and spa, restaurants and, in general, the supply of food and drinks to consume on the spot.
- Services provided to holders of agricultural, forestry or livestock holdings (planting, sowing, grafting, fertilizing, cultivation and harvesting, rearing, keeping and fattening of animals, etc.)
- Cleaning services of public roads.
- Health care, dental and thermal cures that do not enjoy exemption.
- The execution of renovation and repair works carried out in homes.
- Leases with option to buy homes, including parking spaces and annexes.
Certain goods and services have seen the IVA to which they were previously subject to modified from the reduced rate to the general rate. These are:
- Hairdressing services as well as aesthetics.
- Flowers and ornamental plants.
- Services offered by funeral companies.
- Sale of works of art.
- Radiofusion services.
- Purchase of tickets to nightclubs, exhibitions or trade fairs.
- Those services provided by professionals or artists.
Finally, the reduced rate will also apply to the following operations:
- The execution of works, sales with installation of kitchen and bathroom cabinets and fitted wardrobes, as a result of contracts directly formalized between the developer and the contractor, which have as their object the construction or rehabilitation of homes.
- Imports of art objects, antiques and collectibles.
Reduction of IVA on cinema, theatre and other events tickets
Since mid-2018, the government chose to modify the IVA on tickets to cinemas, theaters, sporting events, amusement parks, as well as music concerts, meaning that consumers enjoy a rate of 10% for these types of things.
The Super-reduced Rate of IVA
The super-reduced rate is 4%. This rate applies to the following intra-Community supply, acquisition or import of the following goods:
- Basic products such as bread, flour, eggs, milk, cheeses, fruits, vegetables, legumes, tubers and cereals.
- Books, newspapers and magazines that do not contain solely or fundamentally advertising.
- Medicinal products for human use, as well as medicinal substances and intermediate products, used in obtaining them.
- Vehicles intended for people with reduced mobility.
- Prostheses, orthoses and internal implants for people with disabilities.
- Social housing when deliveries are made by its promoters, including garages and annexes. As well as its lease with option to buy.
- Telecare services, home help, day and night center and residential care.
Indeed there are some products that are exempt entirely from IVA. These are:
- Insurance, capitalization and reinsurance
- Postage stamps
- Savings and financial products
- Educational services and particulate classes
- Professional medical and health care
- Rentals of Social Housing for Housing
What’s new with IVA since 2020?
Now soft drinks, juices and soft drinks with added sugars or sweeteners have increased in their rate of IVA and are now pegged at the higher IVA rate of 21%.
Whilst at Heniam we can always recommend a good Tax Advisor, we are NOT Tax Advisors. This content is provided as a useful guide only. If you have any questions, please contact the team.