Spanish VAT returns

The frequency of VAT reporting in Spain depends on the level of trading

• Quarterly VAT returns – sales below €6m for goods in the previous year
• Monthly VAT returns – sales above €6m for goods in the previous year
• Annual VAT returns – to be completed by all VAT registered businesses

However, in practice the tax authorities will apply their judgement.

As well as declaring the Spanish VAT on any sales, the VAT return also lists VAT on purchases (inputs) that can be offset against the sales VAT due. This includes import VAT. Non-resident companies are allowed to reclaim such input VAT on the same basis as any resident company. Examples of VAT deductions include:

• Restaurant, hotel and travel costs if for the purposes of business
• Conferences and seminars
• 50% of parking costs
• Business gifts and entertainment are not allowable
• Advertising
• Import VAT
• VAT on the purchase of goods for resale
• VAT on capital expenditure

Fines for non-compliance are severe in Spain, ranging from 20% to 200%. There may also be interest fines on late VAT payments, typically 5% per month overdue. This can then rise to up to 20% after one year’s delay.

If the purchase (input) VAT exceeds the sales (output) VAT, then there is a surplus – known as a VAT credit. In principle, this is due back to the VAT registered company. Usually, the business may apply through the final VAT return of the tax year. Often this will trigger a VAT audit.