This week VAT in Spain to rise from 16% to 18%
Just ahead of the imminent rise in VAT this week on Thursday 1st July, consumer protection groups are preparing for an avalanche of complaints and requests for more information on how much consumers are obliged to pay, and when.
VAT in Spain is organized into three groups: super reduced VAT which stands at 4%, reduced VAT at 7% and general VAT which is currently 16%.
However, from the 1st July general VAT is set to rise from 16% to 18%. Reduced VAT will also rise one point to 8%.
The Spanish Union of Consumers (UCE) says that as well as negatively affecting household budgets the rise in VAT could create a lot of controversy especially in the case of purchases made after 1st July or services that need to be paid for.
Basically the law establishes that the rate of VAT applicable must be the current one at the time that a purchase is made or a service contracted. If a purchase has taken place which is to be paid in instalments then the rate of VAT at the time of the purchase is the one which is applicable.
That is any service or purchase made before 1st July is the one which is applicable. For example anyone eating in a restaurant on Wednesday 30th June needs to pay the bill before midnight in order to avoid the new rate of VAT.
However there are many cases where doubts could arise over which rate of VAT is applicable for example gas, telephone, electricity or rent bills will all carry the new rate of VAT even though the service has been consumed the previous month.
However, if an estimated bill has been given (for building work or for a holiday for example) with a closed price including VAT then this is the price that the consumer should be charged regardless of whether the payment is paid in instalments or paid off in full in one payment even if this takes place after 1st July.
On the other hand if a bill includes the price and puts + VAT then the amount of VAT payable is the one which is in effect when payment is made. If a bill includes the price and puts at the end + 16% VAT then the old rate of VAT is payable before 1st July but the new rate will be applicable on any payment made following this date.
Another case is if a bill has been drawn up before 1st July with the old rate of VAT (16% or 7%) for example for a car then this rate is the one that the consumer needs to pay. If the handing over of a product is delayed then the company must bear the brunt of the cost of the rise in VAT.
Antonio López, the spokesperson for UCE, says that the rise in VAT is definitely not good news for consumers even though he recognises the economic situation is not very good at present and that the measure is necessary.
Consumer groups have advised consumers to consult the tax office (la Agencia Tributaria) or go to official consumer groups for advice of they have any doubts over the rate of VAT they need to pay.
Although all consumers will need to pay the new rate of VAT from 1st July some shops such as Zara, Massimo Dutti and some supermarkets such as Eroski have declared that the rise in VAT will not be passed on to consumers. Consumer groups have asked for transparency so that consumers can choose the best places to shop.
The reduced rate of VAT is applicable to all food, except basic products which are charged the super reduced rate of VAT (bread, eggs and milk) as well as transport, hotels, social assistance, health services and tickets for cultural events.
General VAT is applicable to all other products except for books, school material, medicine and state subsidised housing which all have the super reduced rate of VAT together with some of the food products listed above.