Spain doesn’t have a sales tax the way the United States does. That job belongs to IVA (Impuesto sobre el Valor Añadido), the Spanish value-added tax, better known in English as VAT. And it comes with a difference you’ll notice on day one: the tax is already inside the price on the tag. What the shelf says is what you pay at the register.
The stakes change once you stop being just a shopper. If you invoice in Spain, as a self-employed worker or through a company, the IVA you charge is never yours. You collect it for the Spanish Tax Agency and hand it over every quarter. Treating that money as income is the mistake that causes the most damage in a first year here.
In this guide you’ll see what IVA is, the three rates and what falls under each one. You’ll also see why the Canary Islands, Ceuta and Melilla sit outside the system, how to file if you issue invoices, when a traveler from outside the EU can claim the tax back, and what happens when your company is based abroad and sells into Spain.
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In 30 Seconds
- IVA is Spain’s sales tax, and it is always included in the final price a consumer pays.
- There are three rates: 21% standard, 10% reduced and 4% super-reduced.
- The Canary Islands don’t charge IVA. They charge IGIC, with a general rate of 7%. Ceuta and Melilla apply IPSI.
- If you invoice in Spain, you settle IVA every quarter on Form 303, and the money you collected from clients is not profit.
In This Guide
- What IVA Is, and Why Spanish Prices Already Include It
- The Three IVA (VAT) Rates in Spain: 21%, 10% and 4%
- Exempt, Out of Scope and Zero-Rated Are Not the Same
- The Canary Islands, Ceuta and Melilla: No IVA Here
- Who Pays IVA and Who Hands It Over
- If You Invoice in Spain: Registration, Form 303 and Deadlines
- IVA Refunds for Travelers From Outside the EU
- If Your Company Is Based Outside Spain and Sells Here
- Mistakes That Cost Real Money
What IVA Is, and Why Spanish Prices Already Include It
IVA is an indirect tax on the consumption of goods and services in Spain, and the final consumer always bears it. It’s governed by Law 37/1992 on Value Added Tax and administered by the Spanish Tax Agency.
The difference from American sales tax is how it shows up. Sales tax is added at the register and varies by state and county. IVA applies at every link in the chain, each business deducts what it paid on its own purchases, and the percentage is identical across mainland Spain and the Balearic Islands. For you as a shopper, that means the advertised consumer price is the final price: if a T-shirt is marked 24.20 euros, you pay 24.20 euros, and 4.20 euros of that is IVA.
One nuance worth knowing early: between businesses, prices are usually quoted without the tax. When a quote says “3,000 euros plus IVA,” what leaves your account is 3,630 euros.
The Three IVA (VAT) Rates in Spain: 21%, 10% and 4%
The default is 21%, but it doesn’t cover everything. Articles 90 and 91 of the VAT Law set two lower rates for goods and services considered essential or of general use.
| Rate | Percentage | What It Covers in Practice |
|---|---|---|
| Standard | 21% | Clothing and shoes, appliances, cars and fuel, internet and phone plans, electricity and gas, professional services, alcohol |
| Reduced | 10% | Hotels and restaurants, passenger transport, newly built homes, food in general, glasses and contact lenses, movie, theater and concert tickets |
| Super-reduced | 4% | Bread, milk, eggs, cheese, fruit, vegetables and grains, olive oil, books, newspapers and magazines, human medicines, subsidized public housing |
The Standard Rate: 21%
It works as the default bucket: anything the law doesn’t place in a lower band is taxed at 21%. Electricity sits here too, though it has had temporary cuts tied to wholesale prices, so check the breakdown on your latest bill before assuming a figure.
The Reduced Rate: 10%
This covers hospitality, passenger transport, food that isn’t considered basic, and one transaction that matters to almost everyone moving here: buying a newly built home, taxed at 10%.
Watch out for a detail that trips people up: resale homes carry no IVA at all. They pay Transfer Tax instead, set by each autonomous region, as we explain in our guide to buying property in Spain.
The Super-Reduced Rate: 4%
Basic necessities: bread, milk, eggs, cheese, fruit, vegetables and grains, along with olive oil, human medicines, and books, newspapers and magazines that aren’t purely advertising.
Exempt, Out of Scope and Zero-Rated Are Not the Same
Plenty of guides use these three labels interchangeably, and the difference is anything but academic: it decides whether you can recover the IVA on your own purchases.
- Exempt: the transaction is inside the tax, but the law releases you from charging it. Healthcare, accredited education, residential rentals and insurance work this way. Anyone invoicing exempt cannot deduct the IVA they pay on purchases.
- Zero-rated: you do charge the tax, just at 0%, and you keep the right to deduct.
- Out of scope: the transaction falls outside the tax entirely, such as the transfer of a business as a going concern.
The consequence is huge. A physical therapist invoicing exempt pays 21% on the treatment table, the rent and the software, and recovers none of it. That cost comes straight out of the margin.
The Canary Islands, Ceuta and Melilla: No IVA Here
IVA applies in mainland Spain and the Balearic Islands. The Canary Islands run on IGIC, the Canary Islands General Indirect Tax, with a general rate of 7% and its own scale from 0% to 20% depending on the product. It comes from the islands’ Economic and Fiscal Regime and is administered by the Canary Islands Tax Agency, not the national one.
Ceuta and Melilla apply IPSI, a production, services and import tax that each autonomous city regulates with its own rates.
In practical terms: if you sell goods from the mainland to a customer in the Canaries, that’s an export for tax purposes and your invoice carries no IVA. The tax is settled on the islands by whoever imports the goods. And if you set up shop there, both your invoice percentages and the forms you file change.
Who Pays IVA and Who Hands It Over
The final consumer bears the tax. The business or professional hands it to the Tax Agency, acting as a collector. It comes down to two concepts:
- Output IVA: what you charge clients on your invoices.
- Input IVA: what you pay suppliers on purchases and business expenses.
Each quarter you subtract one from the other. Positive, you pay the difference. Negative, you carry it forward or request a refund in the final quarter of the year.
Here’s what that looks like with numbers. An Argentine designer, self-employed in Valencia, invoices 3,000 euros in a quarter and charges 630 euros of IVA. In the same period she buys a computer and pays for services totaling 1,000 euros, with 210 euros of input IVA. She pays 630 minus 210, so 420 euros. The 630 was never hers.
Do you want a expert consultation? Contact us and we will help you.
If You Invoice in Spain: Registration, Form 303 and Deadlines
The circuit is the same whether you’re self-employed or running a company:
- Register with the tax census using Form 036 or 037, stating your activity and the IVA regime that applies. This comes before your first invoice, not after.
- Issue invoices with IVA broken out: taxable base, rate applied and tax amount. E-invoicing is being phased in, as we cover in our guide to mandatory e-invoicing in Spain.
- Keep the statutory ledgers of invoices issued and received. Without them, input IVA is hard to defend in an audit.
- File Form 303 every quarter, including quarters with no activity at all.
The deadlines are April 1 to 20, July 1 to 20 and October 1 to 20 for the first three quarters, and January 1 to 30 for the fourth. If the last day is a holiday, it moves to the next business day.
A calendar tip: if you pay by direct debit, your window closes about five days earlier. Counting on April 20 when the bank cuts off on the 15th is a classic that ends in a surcharge.
Two special regimes are worth knowing. The equivalence surcharge is mandatory for retailers who sell to consumers without transforming the product: they pay their supplier a surcharge of 5.2%, 1.4% or 0.5% depending on the goods and, in exchange, file no Form 303. And the small business franchise scheme, which in other EU countries lets small operators invoice without VAT below a threshold, is not in force in Spain as of this guide’s verification date, whatever the headlines about 85,000 euros say.
IVA Refunds for Travelers From Outside the EU
If your habitual residence is outside the European Union, or in the Canary Islands, Ceuta or Melilla, you can recover the IVA on purchases you take home with you. Two conditions apply: the purchases have to be personal rather than commercial, and the goods have to leave the EU within three months.
The process is digital and it’s called DIVA. When you pay, ask the store for the electronic refund document, which is why you’ll need your passport. On your way out of the EU, validate it at the digital stamping point in the airport or port. Then you collect the money, either there or by transfer, minus the refund company’s commission.
And one clarification that saves frustration: the law no longer sets a minimum purchase amount. You’ll still find guides repeating the old 90-euro figure, but that requirement disappeared years ago. What can impose a minimum is the store or the tax-free operator, as a matter of their own commercial policy.
If Your Company Is Based Outside Spain and Sells Here
Here the logic depends on who your customer is.
- Services to a Spanish business: as a general rule your invoice carries no IVA and your client self-assesses it under the reverse charge. Within the EU you need an EU VAT number and registration in the intra-community operators register.
- Online sales to Spanish consumers from another EU country: below 10,000 euros a year in distance sales across the EU, you apply your own country’s VAT. Above that threshold, you apply Spanish IVA and declare it through the One-Stop Shop.
- A subsidiary or permanent establishment in Spain: you become a Spanish taxpayer like any other, with the same Form 303 and the same deadlines, the scenario we walk through in our guide to starting a business in Spain as a foreigner.
The cost nobody budgets for is delay. Registering for IVA in Spain isn’t instant, and invoicing before it’s sorted means reissuing invoices and correcting quarters you thought were closed.
Mistakes That Cost Real Money
- Spending the IVA you collected. The number one first-year mistake: that money has an owner and a quarterly due date.
- Skipping Form 303 in a quarter with no income. It’s mandatory even at zero, and the penalty arrives all the same.
- Invoicing an EU client without IVA and without checking their EU VAT number. If they aren’t registered, the sale carries Spanish IVA and you end up paying it.
- Assuming everything on the company card is deductible. Meals, client gifts and mixed-use vehicles have their own limits, as we explain in our guide to the tax obligations of self-employed workers in Spain.
- Applying a reduced rate on instinct. Guess low and you cover the difference yourself, with a surcharge on top.
Understanding IVA isn’t about memorizing three percentages. It’s about knowing which one applies to each transaction, what you can actually deduct, and when the money has to be paid. That’s where it’s decided whether the tax stays neutral for you or eats into your margin.
At ILLAY Legal we handle tax matters for individuals, self-employed workers and foreign companies operating in Spain: census registration, quarterly filings, intra-community IVA and dealings with the Spanish Tax Agency, fully online and in your own language. You can see the details on our tax services in Spain page.
Tell us what you sell, who you sell it to and where you sell it from, and we’ll tell you which IVA rate applies, what you can deduct and which forms you owe. If you’ve just arrived, ILLAY Legal can also help with the rest of the picture, starting with our guide to taxes in Spain for individuals and businesses.
Keep reading: taxes in Spain for non-residents · tax residency in Spain
Frequently Asked Questions About IVA (VAT) in Spain
Does the Price on the Shelf Already Include IVA?
Yes. In sales to consumers, the advertised price has to be the final price, tax included. There’s no surprise at the register the way there is with American sales tax. The exception is business-to-business dealings, where quotes are usually given without the tax, so check whether it says “plus IVA” before you accept a number.
Why Am I Not Charged IVA in the Canary Islands?
Because the Canary Islands sit outside the IVA territory. They apply IGIC instead, with a general rate of 7%, administered by the Canary Islands Tax Agency. Ceuta and Melilla work similarly with IPSI. If you live on the mainland and buy from a seller in the Canaries, or the other way around, the transaction is treated as an export or an import, not a domestic sale.
I’m a Foreigner Who Shopped in Spain. Can I Get the IVA Back?
Only if your habitual residence is outside the EU, or in the Canary Islands, Ceuta or Melilla, the purchases are for personal use, and you leave the EU with the goods within three months. You need to request the electronic refund document in the store, with your passport, and validate it at the stamping point before you fly. If you live in Spain, even as a foreign national, you don’t qualify.
When Do I Have to File IVA as a Self-Employed Worker?
On Form 303, four times a year: April 1 to 20, July 1 to 20, October 1 to 20, and January 1 to 30 for the final quarter. You file even if the quarter came out at zero or you had no activity. If you pay by direct debit, the deadline moves up about five days, so it’s worth not leaving it to the last minute.
What’s the Difference Between an Exempt Activity and a Zero-Rated One?
With an exempt activity you don’t charge IVA and you can’t deduct what you pay on purchases, which turns that tax into another business cost. Healthcare, accredited education and residential rentals work this way. Zero-rated means you do charge the tax, at 0%, and you keep the right to deduct. That’s why two activities that look identical on a client’s invoice can have very different margins.
My Company Is Based Outside Spain. Do I Need to Register for IVA?
It depends on your customers. If they’re Spanish businesses, you normally invoice without IVA and they self-assess it. If you sell online to consumers and cross 10,000 euros a year in distance sales within the EU, you have to apply Spanish IVA and declare it through the One-Stop Shop. And if you open a subsidiary or permanent establishment, you file here like any Spanish company.
