New rates of VAT and professional witholdings  
with effect from 1 September 2012

Warning: The information set out below is a general guideline provided by DOMENECH ABOGADOS. Specific advice should be sought before any action in reliance on it is taken, as explained more fully in this website's legal notice.

Pursuant to Royal Decree Law 20/2012 of 13 July, a rise in VAT rates and of tax withholdings to be applied to payments made to professionals came into effect as from 1 September 2012.

Modifications to VAT rates

  • The general VAT rate rose from 18% to 21%.

  • The previously reduce rate of 8% -a applicable, amongst other things, to food and health products, as well as to the purchase of new homes – was increased to 10%.

  • Certain products and services (which until now fell within the reduced rate bracket of 8%) became subject to the new 21% general rate. For example, this affects the sales of flowers, cinema and theatre tickets, hairdressing and funeral services, as well as the sale of artwork.

  • Basic food (such as bread, milk, eggs, fruit and vegetables) retain their special 4% VAT rate, as do the sale of books and newspapers, medication and the sale of new officially protected houses.

Rise in withholdings applicable to professional fees

The general rate for the withholding applicable to invoices issued by professionals was increased to 21%.

The above refers only briefly to certain aspects of the new rules. Also remember that general VAT rules are subject to a great many detailed exceptions, all depending on specific circumstances. Because of this, DOMENECH ABOGADOS encourages you to consult with us as to the application and effects of Spanish VAT regarding any particular activity you may plan to undertake – and always before such activity is commenced.

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