When it comes to taxes, IRPF (Personal Income Tax) is usually the best known or the one that gets the most attention. This may be because there is a set period for declaring and paying it. However, it is not the only form of taxation that exists.
In this respect, Value Added Tax (VAT) is also very important. If you have questions about how it works or how to pay it, do not hesitate to contact BBMabogados, where we have the best experts in this field.
What is Value Added Tax?
It is an indirect tax that levies the domestic consumption of goods and services produced both within the national territory and abroad. It is collected at the moment the purchase transaction for the product or service takes place.
Tax rates
There are three types of VAT, which vary according to the type of product or service, and depending on its importance a different percentage will be applied. That is, the more basic the need for the good, the lower the VAT, whereas goods or services considered luxury or superfluous will be taxed at a higher percentage.
Thus, we have the following distinction:
STANDARD RATE
The percentage is 21% and, as its name suggests, it applies generally to the vast majority of transactions. By way of example, goods to which this percentage applies may include tobacco, alcoholic drinks, and so on.
REDUCED RATE
In this case the applicable percentage is 10%, which will apply to the following categories:
– Supplies of food intended for human or animal consumption. Also the sale of animals, plants and other products used to obtain food.
– The sale of agricultural, forestry or livestock products (this covers seeds, fertilisers, insecticides, herbicides, and other similar items)
– The consumption of water.
These are just some of the most notable ones. If you want to know the full group of goods that pay reduced VAT, do not hesitate to contact us.
SUPER-REDUCED RATE
In these cases, only 4% is applied to products considered basic necessities, namely:
– The sale of foods such as bread, flour, eggs, milk, cheeses, fruit, vegetables, greens, pulses, tubers and cereals.
– The sale of books, newspapers and magazines that do not contain solely or mainly advertising.
– The sale of medicines.
– The sale of vehicles for persons with disabilities.
– The sale of prostheses or implants.
– The supply of officially subsidised housing (viviendas de protección oficial) built by the developer, including garages and annexes.
– Teleassistance, home help, day and night centre and residential care services.
How does VAT work?
The way this tax works is fairly simple. In this respect, let us think about each purchase we make. In such cases we pay the price of the product or service plus a percentage corresponding to tax.
Now, the seller or service provider has the duty, every 3 months, to declare and pay to the Tax Office the difference between the tax charged on the invoices to their customers and the input tax on deductible expenses, that is, those necessary for carrying on their activity.
In this way, the revenue obtained from this tax serves to provide resources to the State.
Persons involved in the payment of VAT
One of the features of VAT is that several persons or parties are involved in the contribution.
Firstly, we have the group of taxpayers, who are all the persons required to pay depending on the type of good or service in question.
On the other hand, there are the taxable persons (sellers of the good or providers of the service), who have the obligation to receive that tax and pay the amounts to the Tax Office. They act as collecting agents and are accountable for that collection to the treasury.
Activities exempt from VAT in Santander
It is important to note that, although it is true that almost all goods and activities are subject to VAT, some are exempt. Therefore, the seller or service provider must not charge or demand that tax from the customer.
Thus we find the following list of activities:
– Teaching provided by public or private bodies authorised by the State.
– Education of children and young people, up to university and postgraduate level.
– Language teaching.
– Vocational training.
– Care of individuals by medical professionals and healthcare services.
– Professional services provided by visual artists, writers, composers, translators, among others.
– Transactions and provision of services relating to insurance, reinsurance and capitalisation.
These, among several others. The list is extensive, but it is a safeguard against ending up wrongly paying for a good that is probably not subject to VAT.
Turn to professional advice in Santander
Paying VAT does not usually present major problems, as it is generated at the moment of acquiring the good or service. Where problems do tend to arise is with the taxable persons who collect these amounts and then have to pay them to the treasury.
If this is your case, do not hesitate to contact us for personalised advice.
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