How VAT (IVA) works when you invoice: rates, charging and reclaiming

Terms used

• IVA — IVA is Spain's value-added tax, added to most invoices and paid over to the tax office.
• Autónomo — An autónomo is a self-employed person registered to work for themselves in Spain.
• AEAT — The AEAT is Spain's tax agency, also called Hacienda.
• NIF — The NIF is your Spanish tax identification number.
• Recargo de equivalencia — The recargo de equivalencia is a special IVA regime for certain retailers, where the supplier collects the IVA.
• Factura completa — A factura completa is a full invoice with the buyer's name and NIF, needed to deduct IVA.

Key rules

• Small-business exemption: Spain has no turnover threshold that lets you skip IVA, so you charge it from your first invoice.
• Rates: The rates are 21%, 10% and 4%, and freelance services are almost always at 21%.
• Deducting IVA: You can only deduct IVA backed by a full invoice in your name and NIF, recorded in your purchases book.
• Vehicles: Vehicles are presumed 50% business use unless you prove otherwise.
• Time limit: You can claim a deduction up to four years after the right arose.

Do you have to charge IVA?

Yes, from your first invoice. Most freelance services on the Spanish mainland and Balearics are charged IVA at 21%, with no small-business turnover threshold below which you can skip it. Spain has no small-business exemption, however little you earn.

The main exceptions:

• Exempt activities. Some health, education and financial services are exempt. You charge no IVA, and you generally cannot reclaim IVA on your expenses either.
• Clients outside Spain. Services to EU business clients or non-EU clients are generally not subject to Spanish IVA. The rule depends on the client's type and location, so check before you invoice. The warning below covers the common mistakes.
• Recargo de equivalencia. This is a special regime for some retailers. If it applies to you, ask the tax office (AEAT) how to invoice.

Which rate applies?

There are three rates on the mainland and Balearics.

For freelancers, 21% is the answer in nearly every case. The 4% rate is rare for services. It applies, for example, to some care services for dependants.

Artistic performances and cultural shows are a grey area. They can be taxed at 10%, but 21% has applied to many in recent years. Temporary cuts on some foods and energy have also come and gone. Confirm the rate for your exact activity with the AEAT before your first invoice.

The Canary Islands, Ceuta and Melilla have different taxes (IGIC and IPSI), not IVA.

Reclaiming IVA on your expenses

The IVA you pay suppliers (input IVA) can be deducted from the IVA you charge. You pay the difference to Hacienda. You can deduct it if all of these are true:

1. Business link. The expense relates to your activity, at least in proportion to its business use.
2. Proper invoice. The supplier issued a full invoice (factura completa) in your name and with your NIF. A simple till receipt is not enough.
3. Recorded. You entered the invoice in your IVA purchases book.
4. Not excluded. Some items are excluded, such as gifts and entertainment. Vehicles are presumed 50% business use unless you can prove more.

You can claim the deduction in the period when the IVA accrued or later, up to four years after the right arose. Mixed-use items need proof of business use, case by case.

If your activity is exempt, you have no right to deduct.

The documents and quick answers below cover what to keep and common questions, such as unpaid invoices and expenses from before you registered.

Documents you need

Documents you need to deduct IVA

• A full invoice (factura completa) from each supplier, made out in your name and with your NIF (tax number), for every expense where you want to reclaim IVA.

• Your IVA purchases book (libro registro de facturas recibidas), with each supplier invoice recorded in it.

• Proof of business use for vehicles and mixed-use items. Vehicles are presumed to be 50% business use unless you can show otherwise.

VAT mistakes that trigger corrections and surcharges

• Charging 21% IVA to EU business clients: If you add Spanish IVA to an invoice for a business client in another EU country, the invoice is wrong. The correct one has no IVA, the wording "Inversión del sujeto pasivo" and the client's EU VAT number. Issue a rectifying invoice (factura rectificativa) within four years, and amend the affected returns.

• Invoicing EU clients without being in the ROI: You must be in the ROI (Registro de Operadores Intracomunitarios, the EU operators register) before invoicing EU services. Without it, intra-EU invoices are not valid for this treatment. Request registration with Modelo 036 before your first EU invoice. Also file the Modelo 349 summary return for those services.

• Wrong or late returns: Missing a quarterly Modelo 303 deadline, leaving out Modelo 349, or deducting IVA on personal expenses or without a valid invoice leads to corrections. A late voluntary correction costs a surcharge of 1% per month up to 12 months, plus late interest. File a complementary self-assessment to fix an underpayment. If you overpaid, request a rectification of self-assessment (rectificación de autoliquidación). Keep valid invoices with correct numbering and mandatory data.

VAT quick answers

Do I have to charge IVA on my very first invoice?

Yes, you charge IVA from your first invoice if the service is taxable in Spain, and there is no small-business threshold that lets you skip it. The exceptions are exempt activities such as health or education, the retail surcharge regime, and clients outside Spain. If you serve a business in another EU country, the invoice usually carries no Spanish IVA.

Do I owe IVA to Hacienda if my client has not paid the invoice yet?

Yes, you owe the IVA for the period of the service or invoice date even if the client has not paid. The exception is cash accounting, which you must opt into. If the invoice stays unpaid, you may be able to reduce the IVA later: after six months, or one year if your turnover is under 6,010,121.04 euros, you must show you tried to collect through a court claim or notarial demand. Then you issue a rectifying invoice within three months and tell the tax agency electronically within one month.

Can I reclaim IVA on expenses from before I registered as an autónomo?

Yes, you can deduct IVA on preparatory expenses from before your registration, if you register your intent to start the activity and hold valid invoices in your name. You take the deduction in your first return after registering. If the activity never starts, the deduction can be reversed, so keep proof of your plans.

Is there a small-business exemption from IVA in Spain?

No, Spain has no turnover threshold below which a freelancer can skip IVA. Only specific cases are outside it: exempt activities, the retail surcharge regime, and services to clients outside Spain.