All of us in business in Spain, whether professionals, shopkeepers, wholesalers, manufacturers, and not forgetting landlords, will have to get to grips with the IVA (Value Added Tax) increases which come into force here on 1^st July imposed by Law 2/2010.  Under the new law goods and services which are currently subject to VAT at 7% will be subject to a rise to 8%, and the general rate of VAT will rise from 16% to 18%.

If you have not already done so you should be getting ready to make the necessary adjustments to your accounting systems and records, and preparing to adjust automated tills, computerized invoicing, and at an elementary level getting used to using the correct set of buttons on your pocket calculator!

If you deal in individual transactions the change in the rates amounts to little more than getting used to the new arithmetic.  However there are special rules if you accept or make payments of IVA on rents or leases, pay for goods and services in advance, or if you are in the building trade.      

Rental and Leasing

Article 75 of the Ley del IVA (37/1992) makes it clear that the rate of IVA to be applied to rents or leases, is the rate in force when the installment of rent or the leasing payment is due.  So, if you rent property IVA should be charged at 18% for the payments due from 1^st July onwards.

Sometimes rental and leasing contracts only require payments once a year.  If you rent property or lease business equipment on this basis, the amount of IVA is apportioned over the period which includes the date on which the rates change; 7% or 16%on the amount which relates to the period up to 30^th June and 8% or 18% on the proportion which relates to the period from 1^st July onwards.

Payments in Advance

If you have paid for goods or services in full before 30^th June but which are not to be delivered or supplied until after 1^st July then the rates of IVA applicable are the old rates of 7% and 16%.   The exception to this rule is for building or other raw materials which are subject to IVA at the rate in force at the time they are delivered to the buyer (Article 75 para. 2 of Law 37/1992).  The purpose of this rule is to prevent large scale purchases of bulk materials at the lower rates of IVA but which are for future delivery.

Building Works

Building works for which the certificates of new works “Obras Nuevas” are issued after 1^st July are subject to IVA at the new rates.

Discounts and Refunds

If you give or receive a discount or a refund from a transaction, the rate at which the IVA is allowed is that which applied when the original transaction took place.

Low Value Imports

If you import goods of low value (with the exception of alcohol, tobacco, or perfumes) from outside the European Union, for example from the U.S.A., China, or other third countries, then since 2^nd March the value of goods which are exempt from customs duty has been reduced from €150.00 to €22.00.  So that DVD, computer game, or nifty electronic gadget you order on-line may no longer be quite the bargain it seems by the time you have paid the customs duty and the handling charge imposed by “correos” or other carrier.

If you have any queries about how the change in VAT rates may affect you please either contact Chris Spence or Michael Olmer at our office, or speak to your own accountant or gestoria.