The Non-Resident's Guide to VAT in Spain: When to Pay It and How to Get It Back

When you think of taxes in Spain, your mind probably jumps to income tax or property tax. But there’s another three-letter word that affects nearly every transaction you make: VAT. In Spain, this is known as Impuesto sobre el Valor Añadido, or IVA. For non-residents, understanding how IVA works is crucial, whether you’re here on holiday, buying goods for your business, or providing services in Spain.

Many non-residents mistakenly believe VAT is just an unavoidable cost of purchasing goods and services. While that's often true for day-to-day consumption, there are specific circumstances where you, as a non-resident, can and should recover the VAT you've paid. This guide will break down the essentials of VAT for non residents in Spain, explaining when you have to pay it and, more importantly, how you can get it back.

What is VAT (IVA) and Who Pays It?

VAT is a consumption tax applied to most goods and services sold in Spain. The standard rate is currently 21%, with reduced rates of 10% (e.g., for restaurant services, hotel stays) and 4% (e.g., for basic foodstuffs, books). The price you see in a shop or on a restaurant menu almost always includes VAT.

As a general rule, anyone who consumes goods or services in Spain pays the VAT, regardless of their residency status. If you buy a souvenir, eat at a restaurant, or rent a car, the price includes IVA. For personal consumption, this is usually the end of the story. However, the situation changes significantly if you are a tourist making purchases to take home or a business incurring expenses in Spain.

1. The Tourist VAT Refund: The "Tax-Free" Shopping Perk

This is the most common way non-residents can recover VAT. If you are a resident of a non-EU country and you visit Spain for a short period, you are entitled to a refund of the VAT paid on goods you purchase and take back home with you.

Here’s how it generally works:

• Check the Store: You must shop at stores that are part of the "Tax-Free" scheme. They will usually have a sticker in the window.

• Request the Form: When you make a purchase (there's usually a minimum purchase amount per store, often around €90), you must ask the retailer for the tax-free form, known as the DIVA form. You will need to show your passport to prove your non-EU residency.

• Validate at the Airport: Before checking in your luggage on your flight out of the EU, you must take your purchases, receipts, and the DIVA forms to the customs validation point. This can be done at a physical customs desk or at an electronic DIVA kiosk. An officer may ask to see the goods, so have them handy.

• Claim Your Refund: Once the forms are validated, you can get your refund from one of the tax refund operators located at the airport (e.g., Global Blue, Planet). You can usually choose to receive it in cash (with a commission) or back on your credit card.

This process is designed for goods, not services. You cannot reclaim VAT on your hotel bills or restaurant meals.

2. VAT Refunds for Non-Resident Businesses

This is a more complex but highly valuable area for foreign companies. If your business is based outside of Spain but you incur VAT on expenses related to your activity in Spain, you may be able to reclaim it. This is particularly relevant for:

• Businesses attending trade fairs, exhibitions, or conferences in Spain.

• Companies paying for professional services (e.g., consulting, legal advice) in Spain.

• Transport companies purchasing fuel.

The procedure for business VAT recovery depends on where your business is established:

• EU-Based Businesses: If your company is established in another EU country, you can reclaim Spanish VAT through a standardized electronic portal in your home country (under the EU Directive 2008/9/EC).

• Non-EU Businesses: If your business is in a non-EU country, the process is more complex. You can only reclaim Spanish VAT if your home country has a reciprocity agreement with Spain. You will also need to appoint a fiscal representative in Spain to handle the claim on your behalf.

This is not a simple DIY task. The paperwork is extensive, deadlines are strict, and the requirements are precise. A misstep can lead to your claim being rejected. This is a prime example of where consulting a tax lawyer in Spain is not a luxury, but a necessity for ensuring a successful VAT recovery.

3. When Do You Need to Charge VAT as a Non-Resident?

The tables turn if you, as a non-resident, provide services or sell goods in Spain. For example, if you are a non-resident consultant who provides services to a Spanish company, you may be required to register for VAT in Spain and issue invoices with Spanish VAT.

The rules around this ("reverse charge mechanism," place of supply rules) are incredibly complex and depend on the nature of the service, who the client is (a business or an individual), and your own business structure. Getting this wrong can lead to significant penalties from the Agencia Tributaria. Before engaging in any economic activity in Spain, seeking professional advice from a lawyer in Spain who specializes in non-resident taxation is critical to ensure you are compliant from day one.

In conclusion, VAT is more than just a line item on your receipt. It's a complex tax that offers opportunities for refunds and poses risks of non-compliance. Whether you are a tourist enjoying the sights or a business expanding your reach, understanding your VAT position is key to managing your finances effectively in Spain.

Whether you need to recover VAT on business expenses or understand your obligations when operating in Spain, our expert team can provide clarity and support. Book an appointment to discuss your specific situation.