Ecommerce and VAT in Spain

Setting up an ecommerce business is increasingly easy and Spain is a very good place, as the VAT is one of the lowest in the EU. If you are operating an online activity you are required to charge Spanish VAT tax if you are selling from or to Spain according to different situations.

The Spanish law distinguishes two forms of e-commerce:
• Offline ecommerce
• Online ecommerce
Offline ecommerce

The Spanish tax authority calls “Offline ecommerce” the sale of physical products through electronic medias. The only difference with traditional commerce is that in this case Internet is used merely as a different distribution or sale channel. In practice there is no difference with a traditional sale as the same product could be sold in a shop, by catalog or by phone, therefore the taxation regime the VAT and all the taxation is exactly the same as traditional commerce.

Online ecommerce
The Spanish tax authority calls “Online ecommerce” the commercial transactions where the product is completely delivered through electronic media, including data storage services.

Comercio Online is thus a blanket term that comprises services (for example web hosting, remote e-learning or remote consultancy) and products delivered electronically like movies, music and eBooks. In practice these products will be considered services by the Spanish administration.
Canary Islands, Ceuta and Melilla have a special VAT regime and in this context should be considered “outside the EU” as they are outside the European Union VAT Area.

For online ecommerce there are several cases:
1) The supplier is in Spain and the recipient is a consumer in Spain or the EU: The normal VAT rules will be used. The supplier will add the VAT to the sale and he will later on pay the VAT to the Spanish Tax authorities.

2) The supplier is in Spain and the recipient is a business in mainland Spain: Normal VAT rules will be used. The supplier will add the VAT to the sale and he will later on pay the VAT to the Spanish Tax authorities. The recipient will be able to detract the VAT in his quarterly VAT declaration.

3) The supplier is in Spain and the recipient is a business in another EU state: In this case the supplier will not charge the Spanish VAT and the recipient won’t have to pay VAT. However the recipient will have to file a reverse VAT charge procedure. In practice this is an accounting procedure in which the recipient will pay and deduct the VAT at the same time.

4) The supplier is in Spain and the recipient is a business in the Canary Islands, Ceuta or Melilla: There won’t be VAT in the transaction.

5) The supplier is in Spain and the recipient is a business or a consumer outside the EU: There won’t be any VAT in the transaction (unless the service is enjoyed on the Spanish territory).

6) The supplier is in the EU excluding Spain and the recipient is a consumer in Spain: The consumer will pay the full “VAT included” price of the supplier country.

7) The supplier is in the EU excluding Spain and the recipient is a business in mainland Spain: In this case the supplier will not charge his country VAT and the recipient won’t have to pay any VAT. However the recipient will have to file a reverse VAT charge procedure in his accounting.

8) The supplier is outside the EU and the recipient is a business in Spain: There won’t be any VAT to be paid but the recipient will have to file a reverse VAT charge procedure.

9 The supplier is outside the EU and the recipient is a consumer in Spain: If the business doesn’t have any branches in any EU country it will have to register in Spain or in another EU country according to the Law 37/92. This registration procedure will be simplified but will require the business to choose a EU state. Once this registration is done the business will charge and deduct VAT exactly like a EU company or professional. This was necessary to adjust on the unfair advantage that businesses outside the EU were having by providing products in practice VAT free.

Conclusion
Whenever starting an online business in Spain it is always good to ask the opinion of a Spanish lawyer. Ecommerce tax issues can be potentially tricky as they are regulated mostly by EU laws and international treaties.

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