The latest rise of VAT took place on the 1st of September 2012. Another strategy to try to increase the public coffers, whilst citizens were drowned with facing such rise in their daily lives.

The business sector was flooded with fear by a serious downturn in the Spanish economy and a significant reduction in sales. Fortunately for some, big companies from various sectors stated that they would take this VAT increase without actually raising their prices, as in the textile sector was the case of Inditex group, Primark and H&M.

But, how did it really affect everyone?

As a unique relief, we had the news that basic food products, medicines, newspapers, books, magazines, and instruments such as prosthesis and wheelchairs for the disabled, among others, were relieved of this increase.

The rest of the food, transport, and restaurant business moved on from an 8 percent of VAT to a 10 percent.

Leisure and culture were the sectors that experienced the sharpest rise, from 8 to 21 percent.

Thus, enjoying meals at restaurants or travelling became somewhat a luxury for many families.

But, how did it affect and continues to affect self-employed workers and small businesses?

If it is already difficult to be self-employed, with this increase, you should bear in mind that your services will be invoiced at a higher rate, since the general tax rate goes from 18% to 21% and the reduced rate drops from 8% to 10%, although the reduced rate of VAT does not rise and is still 4%.

As a positive factor in relation to such increase, it was reported that from the 1st of February 2014, self-employed workers and SMEs will not have to pay the Tax Treasury the VAT of bills that they have not cashed.

Within the last two years of this great VAT rise, points have been raised to initiate another rise of VAT, fortunately the Minister of Finance and Public Administration, Cristobal Montoro, confirms that VAT will not be increased for the moment.

So far we can relax and continue recovering from this last rise, considering that whether you are a self-employed worker or a small business, Daemi Zabalza & Asociados has a team of experienced lawyers and professional Tax Advisors and Consultants that can handle your finances and taxation and advice the best way forward.