VAT is a tax on consumption (whether by purchase of goods or services), and it is the AEAT – Tax Agency, who benefits from the income of this tax. For business or entrepreneurs who by the nature of their business should invest in EU countries apart from investing in Spain, commonly known as, “intercommunity transactions”, they may request that invoices that are issued in other countries are exempt from VAT, i.e. not charging that tax on the invoice. However, in order to be able to exercise this transaction, both client and provider, must have registered as intercommunity traders.
Delineating the concept of goods and services
Goods: This refers to the sale of products or goods to other EU member countries. Such transactions relating to goods are exempt from VAT tax.
Services: This refers to the services provided to customers in other EU member countries, and that have not been provided in Spain.
The VAT rates in Spain, as in other member states of the European Union, must comply with the provisions of Title VIII of the Tax Directive, which states that the standard rate cannot be less than 15% (except some regions), with no upper limit, although they may apply one or two that may be even less, but never less than 5%, except in the case of Article 114 of the Directive, reduced rates which in Spain are applied.
Since September 2012 the VAT rates in Spain are:
General rate: 21%;
Reduced rate: 10%;
Super-reduced rate: 4%;
Registration of Intra- Community Traders
The Department held responsible of keeping record of intercommunity traders is now called ROI (Registry of Intra-Community traders). It holds the list of companies discharged under this regime, so if any entrepreneurs – receiver or transmitter of an invoice- are not enrolled in the registry, VAT shall be issued without exception.
In terms of percentage of VAT to be applied, this will depend on the country from which the invoice is issued, i.e., country of origin, and it will be the recipient who may deduct VAT automatically or request a VAT refund, as appropriate.
Operations that may be exempt from VAT in EU states members are proscribed in Directive 2006/112/EC. Therefore, each of the member countries of the European Union must return the VAT of goods and services purchased, provided that such activities are for the sole purpose of transactions listed in the Directive.
Application in the Registry of Intra-Community Operators (ROI)
Once an application has been sent to the Registry, entrepreneurs wishing to purchase goods and services in the EU countries must inform the seller of the CIF number (company number) in order to verify the registration and issue the invoice without VAT, avoiding the procedure of requesting a refund.
Regarding the identification number, the entrepreneur needs to submit the CIF number – if a company – or NIF number – if acting as an individual person.
Our law firm in Marbella – Daemi Zabalza & Asociados – can inform you whether you need to register your company and ultimately submit your application on your behalf so within a maximum of 10 ten days you can benefit from this.