Spanish VAT (IVA) Submission: Key Information for Property Owners and Investors
If you own property in Spain or carry out business activities here, understanding your obligations regarding Spanish VAT (IVA – Impuesto sobre el Valor Añadido) is essential. Whether you are a resident or a non-resident, VAT compliance affects real estate transactions, rentals, and service provision.
At Frau Legal, our team of tax lawyers in Mallorca and Ibiza provides expert advice on VAT obligations for individuals and companies, ensuring compliance with Spanish and EU regulations.
1. What is VAT (IVA) in Spain?
VAT is a consumption tax applied to most goods and services in Spain.
It is governed by Law 37/1992 and Royal Decree 1624/1992, which align with EU VAT directives.
The general VAT rate in Spain is 21%, although reduced rates of 10% and 4% apply to specific goods and services (such as basic food, transport, or cultural events).
In real estate, the applicable rate and whether VAT applies depend on the type of transaction.
2. VAT in real estate transactions
In Spain, VAT applies to the first transfer of a new property (usually from a developer or builder to the first buyer). Subsequent sales between private individuals are generally exempt from VAT and instead subject to Transfer Tax (ITP).
Examples:
- New build purchase: subject to 10% VAT (residential use) or 21% (commercial).
- Plot purchase: 21% VAT if the seller is a company or professional developer.
- Second-hand property: exempt from VAT but subject to ITP, which in the Balearic Islands ranges from 8% to 11.5%, depending on price.
When a company buys property for business use, it may recover the VAT paid through its VAT return, if all legal conditions are met.
3. VAT obligations for non-resident owners
Non-resident individuals or companies renting out property in Spain may be subject to VAT in specific cases — particularly when renting to companies or for tourist purposes.
- Long-term rentals for residential use: VAT exempt.
- Short-term or tourist rentals: generally subject to 21% VAT.
Non-residents must register for VAT in Spain by obtaining a Spanish tax identification number (NIF) and filing periodic VAT returns (Modelo 303) and annual summaries (Modelo 390).
📄 More details: Agencia Tributaria – Modelo 303
4. VAT submission and deadlines
VAT returns in Spain are generally filed quarterly:
- 1st quarter: April 20
- 2nd quarter: July 20
- 3rd quarter: October 20
- 4th quarter: January 30 (together with the annual summary)
Businesses with higher turnover may be required to submit VAT monthly, under the Immediate Supply of Information (SII) system.
Failing to file or pay VAT on time can lead to penalties ranging from 50% to 150% of the unpaid amount, plus late payment interest.
5. Why hire a tax lawyer
Spanish VAT law is complex, especially for foreign investors, companies, or property owners with cross-border activity. Errors in VAT registration or reporting can lead to costly fines and administrative complications.
At Frau Legal, we assist clients in:
- Registering for VAT in Spain
- Preparing and submitting VAT returns (Modelo 303 and 390)
- Managing VAT recovery for business-related property purchases
- Liaising with the Spanish Tax Agency on behalf of clients
💼 Learn more about our Tax and Fiscal Law services or contact us for tailored assistance in Mallorca and Ibiza.
