Spain set to increase its VAT rates from July 2010

Spain's 2010 Budget Proposal has been passed

The Cabinet of Ministers has recently passed Spain’s 2010 Budget Proposal. It approved the increase of the country’s standard rate of VAT from currently 16% to 18%. The higher reduced rate of currently 7% will rise to 8%.

Both rate changes will come into effect on 1 July 2010.

Spain operates a system of three VAT rates:

  • The standard rate of currently 16% is applicable to any taxable transactions that are not within the scope of the reduced rates or other exemptions.
  • The reduced rate of currently 7% applies to hotel accommodation, restaurant services or admission to cultural events.
  • The reduced rate of 4% is due on so-called “basic necessities” such as bread, fruit and vegetables. This rate is not set to change.

If your business requires assistance with the change in the rate of Spanish VAT, e.g. in understanding how supplies covering the period before and after the rate change should be treated for VAT purposes, or any other queries in relation to the practical issues arising from a rate change both for the sale and the purchase of goods or services, please contact your Meridian Client Services Manager, usual contact or local office.