IVA, short for Impuesto sobre el Valor Añadido, is Spain’s version of VAT, the Value Added Tax.
It is the extra slice added to most goods and services, whether you’re ordering a coffee, hiring a builder, or buying a sofa from IKEA.
IVA an indirect tax because it doesn’t touch your wages directly. Instead, you pay it whenever you spend.
When does IVA apply?
You will come across IVA in three main cases:
- Goods and services: Anything sold by businesses or professionals as part of their work.
- EU purchases: Goods moved across EU borders, even sometimes by individuals (new cars, for example).
- Imports: Goods arriving from outside the EU, regardless of who buys them.
How does IVA work behind the scenes?
Businesses add IVA to their prices, then hand it over to Hacienda (the Spanish tax office). But because they also pay IVA on their own purchases, they can deduct that amount. In the end, each business pays tax only on the value it adds.
For the rest of us, though, there’s no deducting. The final consumer always pays the full IVA, whether it’s in the price of a loaf of bread or a new fridge.
IVA tax rates in Spain
Not all goods and services are taxed equally. Spain has three main IVA rates:
- 21% (general rate) – The default. You’ll see it on most purchases, from clothes and electronics to restaurant meals and building services.
- 10% (reduced rate) – For essentials and certain services, such as food products (not luxury items), public transport, hotel stays, and some cultural events.
- 4% (super-reduced rate) – For the real basics: bread, milk, eggs, fruit, veg, medicines, books, and newspapers.
So, your croissant in the café might be at 10%, your prescription medicine at 4%, and the flat-screen TV you buy to watch football will sting you with 21%.
IVA and expats: when it matters most
If you live, work, or just spend a lot of time in Spain, here are the situations where IVA will definitely cross your path:
- Buying a property – If you buy a new-build home directly from a developer, you’ll pay 10% IVA on top of the purchase price, plus stamp duty. For resale properties, it’s not IVA but a transfer tax instead.
- Cars – New cars come with 21% IVA. Second-hand cars bought from a dealer also include IVA, but if you buy privately, you’ll pay a transfer tax instead.
- Running a business – If you set up shop in Spain, you’ll need to register for IVA, charge it to your customers, file quarterly returns, and deal with Hacienda’s favourite word: papeles (paperwork).
- Renovations and services – Hiring builders, plumbers, electricians, or even gardeners? Expect 21% IVA on the invoice, unless it qualifies for a reduced rate under specific circumstances.
- Tourism – Hotels, holiday rentals, and even hiring a car at Alicante airport will have 10% IVA built into the price.
IVA Tax: The bottom line
IVA might feel invisible because it’s usually included in the price you see, but it’s always there. Businesses collect it, Hacienda pockets it, and we, the consumers, are the ones who ultimately pay it.
