If you are self-employed, you surely have to submit VAT returns every three months. It is mandatory since you have to collect VAT from your clients. And, at the same time, when you make purchases you have to pay VAT. But, do you know that there are activities exempt from VAT?
Next we are going to talk about what they are and why they are exempt from VAT, We will tell you about the regulations and much more. Shall we start?
What are VAT exempt activities?
To make it easy for you to understand, VAT-exempt activities are those services and goods that, due to their nature, are a taxable event, and therefore it is mandatory to apply VAT to them. But due to the law, this is not applied and the person does not have to pay it.
In other words, They are services and goods that, although VAT is applied to them, for some reason, which may be legal, cultural, social... it is not applied., but rather it is given as a "tax benefit." In this way, that good or service is acquired without having to pay that extra VAT.
What are the activities exempt from VAT?
Now that it has become clearer to you what VAT-exempt activities are, it is necessary that, if you want to go deeper, you understand where these are included in Spanish regulations.
Specifically, it is the Law 37/1992, of December 28, on Value Added Tax, better known as the VAT Law. In it, article 20 specifically tells us about all activities exempt from VAT, which would be:
- Provision of services and deliveries of goods.
- Provision of hospitalization or health care services and other related services such as: food services, accommodation, operating room, supply of medicines and medical supplies and other similar services provided by clinics, laboratories, sanatoriums and other hospitalization and health care establishments.
- Assistance to individuals by medical or health professionals, psychologists, speech therapists and opticians, certified in official centers or recognized by the Administration.
- Deliveries of blood, blood plasma and other fluids, tissues or parts of the body, always for research or medical purposes.
- Provision of services by stomatologists, dentists, dental mechanics and prosthetics. This also includes delivery, repair and installation.
- Services provided by unions, groups or autonomous entities to their own members, always with some conditions.
- Delivery of goods and services from Social Security or managing or collaborating entities.
- Provisions of social assistance services carried out by Public Law or private social entities. Specifically, the article talks about: a) Protection of children and youth; b) Assistance to the elderly; c) Special education and assistance for people with disabilities; d) Assistance to ethnic minorities; e) Assistance to refugees and asylees; f) Assistance to passers-by; g) Assistance to people with non-shared family responsibilities; h) Community and family social action; i) Assistance to former inmates; j) Social reintegration and crime prevention; k) Assistance to alcoholics and drug addicts; l) Cooperation for development.
- Education of childhood and youth, care and custody of children. It includes the school cafeteria, nursery classrooms, school education, university education, postgraduate courses, languages, training and professional retraining.
- Private classes for natural persons.
- Transfers of personnel carried out by religious entities that are registered in the corresponding Registry of the Ministry of Justice. Only for the development of hospitalization, health care and others directly related to them: social assistance; education, teaching, training and professional retraining.
- Provision of services and goods from legally recognized organizations or entities that do not have a profit purpose, but rather a political, union, religious, patriotic, philanthropic or civic purpose. And only to the members of those organizations.
- Services to individuals related to the practice of sports or physical education.
- Provision of services carried out by public law or private cultural entities.
- Transportation of the sick or injured in ambulances or special vehicles.
- Insurance, reinsurance and capitalization operations.
- Deliveries of them from the Post Office and legal tender stamps.
- Financial operations: “a) Cash deposits in their various forms; b) The transmission of cash deposits; c) The granting of credits and money loans; d) Other operations, including management, related to loans or credits carried out by those who granted them in whole or in part; e) The transmission of loans or credits; f) The provision of bonds, guarantees, sureties and other real or personal guarantees, as well as the issuance, notice, confirmation and other operations related to documentary credits; g) The transmission of guarantees; h) Operations related to transfers, money orders, checks, drafts, promissory notes, bills of exchange, payment or credit cards and other payment orders. This also includes interbank clearing of checks and stubs; acceptance and acceptance management; and the protest or substitute declaration and the management of the protest.
Also: i) The transmission of effects and payment orders; j) Purchase, sale or exchange operations and similar services involving foreign currency, banknotes and coins that are legal means of payment, with the exception of collectible coins and banknotes and gold, silver and platinum pieces. ; k) Services and operations, except deposit and management, relating to shares, participations in companies, bonds and other securities not mentioned in the previous letters; l) The transmission of the securities referred to in the previous letter and the services related to it; m) Mediation in exempt operations.
Finally: n) The management and deposit of Collective Investment Institutions, of Venture Capital Entities managed by management companies authorized and registered in the special administrative Registries, of Pension Funds, of Mortgage Market Regulation, of Securitization of Assets and Retirement Groups, constituted in accordance with their specific legislation.” - Lotteries, bets and games organized by the State Lottery and Betting Society and the National Organization of the Blind. Also by organizations accredited by the Autonomous Communities.
- Deliveries of non-buildable rural land.
- Second and subsequent deliveries of buildings.
- Leases considered service.
- Deliveries of goods already used by the transferor.
- Deliveries of goods on which the total exclusion of the right to deduct is determined.
- Professional services, such as those offered by plastic artists, writers, literary, graphic and photographic collaborators of newspapers and magazines, musical composers, authors of theatrical and plot works, adaptation, script and dialogues of audiovisual works, translators and adapters.
- Provision of services and goods made by the political parties themselves with the aim of providing them with financial support.
I have to say that the article It is much more extensive, and in many sections there are exemptions or requirements that must be met. So I recommend that, if you are in one of those groups, it is best that you review the law to see if there are any key points to take into account.
What does it mean for an activity to be exempt from VAT?
When one of the activities you carry out is exempt from VAT, that means that, when making the invoice, it should not include it. In some cases it is not necessary to specify anything; but in others it is advisable to put the exact article of law to avoid problems.
In addition to the invoice without VAT, also, In order to declare taxes, you must bear in mind that, if it is exempt from VAT, it would not fall within model 303 (VAT declaration). In other words, the amount you get as a base will not be the same as with model 130 (personal income tax) because in 303 only activities with VAT are taken into account.
Is it now clearer to you which activities are exempt from VAT and what that means?