IVA (Sales Tax) Increase In Spain 2012

tax_increase_spainThe announcement by the Government in Spain that sales tax is to increase due to pressure from Europe comes as little surprise after months of rumours. The date for introduction will finally be 1 September 2012 and consumer organisations estimate that families will have to find an extra 415€ per year just to cover the increase.

IVA in Spain is divided into 3 basic rates (excluding special taxes on items such as tobacco and fuel).

  • Super-reduced rate: will remain unchanged at 4%. This rate includes basic foodstuffs such as bread, eggs and milk; books and newspapers; medicines.
  • Reduced rate: currently 8% will be raised to 10%. This is charged on transport, tourism, restaurants, water and foodstuffs (except alcoholic beverages).
  • General rate: currently 18% will be increased to 21%. This group includes items not included in the previous two groups such as clothing, footwear, electronics and furniture.

Some companies such as Inditex which owns brands including Zara, Oysho, Pull & Bear and others have announced that they will absorb the increase of 3% in their pricing structure.

One of the biggest surprises has been that various products and services have been moved from the current 8% rate to the new 21% rate – a 13% increase. This is the case of the following: dentists, hairdressers, beauty treatments, funeral services, gyms, cinema & theatre tickets, theme parks & zoos. It is doubtful that companies will be able to absorb such a large increase and therefore there are some areas where consumers can save before these increases come into force. After confusion in the Spanish media, it has been confirmed that glasses and contact lenses sales tax will increase to the new 10% rate, but as companies may use it as an excuse to increase prices more it’s probably a good idea to get your eyes tested now to see if you need new lenses, and it may be a good idea to go to your dentist (although in August in Spain many will be closed part of the month). Whether to buy tickets for entertainment is a more difficult question as you may find yourself in a position not to be able to use the tickets due to unforeseen circumstances and then the saving of 13% becomes a loss of the total cost of the tickets.

Additional bad news for the housing market in Spain was also announced: the rate on the purchase of a property will be increased from 4% to 10% on 1 January 2013.

At Money Saver Spain we wouldn’t advise rushing out to buy high value items unless you’d already planned to do so during September/October this year, but on the other hand even though some stores may absorb the increases we wouldn’t be surprised to see how others round up prices with the excuse of the sales tax hike.

Utilities companies will apply the new 21% rate on bills from 1 September even though consumption was during the previous 18% period – all the more reason for you to ensure you’re on the cheapest tariff given the rises already implemented this year. Also phone & internet use in August and billed in September will have the new rate applied. Water is billed either monthly, or every 2 or 3 months depending on where you live, hence some consumers will see the new tax rate applied on a 3-month bill!