It is mandatory for your company to apply for VAT registration with the Spanish tax authorities before starting your activities.

Failure to register the commencement of activities in the Spanish territory is penalized with a fixed penalty of € 400.

If your company wishes to register for VAT in Spain, it is essential to contact the Spanish tax authorities. There is no need to contact the tax authorities in your country of establishment.

In particular, your company will need to submit the following documents:

• The VAT registration form(s) completed in the language of the country
• A copy of the articles of association
• An extract from the trade register
• A certificate of VAT liability
• Power of attorney (if using a fiscal agent)
• Proof of activity on the territory of the country concerned: a contract, an order form, etc.

The Spanish tax authorities may require some of these documents to be translated into Spanish.

If your file is complete, it generally takes one month to obtain the VAT number.

Non-European companies cannot register for VAT themselves in Spain. They have to do it through a VAT representative. This is a local company that will represent you to the local VAT authorities. He is responsible for the respect of all your VAT obligations, including those of which he was not aware. For this reason, he may require a deposit (e.g. a bank guarantee) from you before accepting the representation assignment.

European companies are not obliged to appoint a VAT representative. However, to facilitate their relations with the local tax authorities, they may appoint a proxyholder (agent) to carry out the tax formalities on their behalf. In this case, it is not necessary to issue a bank guarantee. The company remains solely responsible for paying its VAT debts.

Your company must keep ledgers sufficiently detailed to enable the application of VAT and its control by the Spanish tax authorities.

However, companies filing monthly VAT return are submitted to the Immediate Supply of Information (SII) and must keep their business records on the website of the Ministry of Finances by electronically providing the information requested therein, together with some additional data of the invoices (but not the invoices themselves).

Each sales invoice must be submitted no later than the fourth working day from the date of the invoice. As for purchase invoices, they must be submitted at the latest on the fourth working day following the date the invoice is registered in the books.

If your company exceeds certain thresholds, it will be obliged to file an Intrastat statement.

The thresholds in Spain are:

• Arrivals: € 400,000
• Shipments: € 400,000

As a supplier of goods or services, your company is normally obliged to issue an invoice with VAT to its customer. This is the general rule. However, there are many derogatory situations which transfer this obligation to pay tax to the customer himself. These situations are known as "reverse charge" situations.

The special reverse charge rules have been introduced in Spain for foreign companies:

For supplies of goods:

The reverse charge is applicable to all domestic supplies of goods made by a business not established in Spain, provided that the customer is VAT registered in Spain (whether he is established or not in Spain). The reverse charge is therefore also applicable between two non-established taxpayers.

For supplies of services:

The reverse charge is applicable to all domestic supplies of services made by a business not established in Spain (whether he is VAT registered or not in Spain) , provided that the customer is established for VAT purposes in Spain.

The VAT Directive lays down the minimum information that you must include on your invoice. In some cases, countries may add additional compulsory information. Particular attention should be paid to the conversion rates when the currency used on the invoice is not that of the country in which the transaction takes place, and to the specific statements justifying the legal reason why VAT is not charged.

Spain has 3 differents VAT rates :

• Standard rate : 21%
• Intermediary rate : 10%
• Reduced rate: 4%

It is possible to send invoices in paper format.

There are several methods to obtain refunds of Spanish VAT. The practical formalities for reclaiming foreign VAT will differ depending on whether or not your company is established in Europe and/or is identified for VAT in Spain:

• If your company has a VAT number in Spain, it will have to submit a refund application in the form and within the timeframe required by local regulations. In principle, the VAT credit is automatically transferred to the following month. Under the general procedure, your company may only apply for the refund in the last VAT return of the year.

• If your company is established in a European country and does not have a VAT number in Spain, it will have to apply for a VAT refund electronically from its country of residence, in the form and within the time limits required by Directive 2008/9.

• If your company is established outside Europe and does not have a VAT number in Spain, it will have to appoint a tax representative to submit its refund application in the form and within the time limits required by the 13th Directive.

VAT incurred on purchases, imports or intra-Community acquisitions of goods and services can be reclaimed by a foreign company provided that these expenses are for taxable activities and provided that the appropriate documentation is available.

No input VAT can be recovered on any of the following expenses:

• Food and drinks ;
• Accommodation and catering ;
• Transfer and travel services ;
• Entertainment.

Nevertheless, VAT on the above expenses could be totally or partially deductible if they are deductible from a corporate tax point of view or intended for business purposes.