At the end of December 2023, the Spanish government enacted two Royal-Decree Laws impacting VAT rates, with implications for both consumers and businesses from 2024 onwards.
Reduction in VAT Rates for Select Food Products
Effective January 1 - June 30, 2024
- Olive and Seed Oils, Pasta: These will now be taxed at a reduced rate of 5%.
- Zero VAT Rate on Essential Food Items: This includes common bread (and related frozen dough), various types of milk, cheeses, eggs, and natural products like fruits, vegetables, legumes, tubers, and cereals.
Changes in VAT for Energy Products
Electricity Supplies
For contracted power ≤ 10 kW and social bonus recipients, VAT is set at 10% for the entire year of 2024.
Natural Gas
A VAT rate of 10% applies from January 1 to March 31, 2024.
Biomass Energy Products
Pellets, briquettes, and firewood, as ecological substitutes for natural gas, will also see a VAT rate of 10% until June 30, 2024.
The latest Royal-Decree introduces amendments to the VAT Regulations, primarily stemming from the Budget Law 31/2022. This includes a notable change in the refund procedure for non-EU companies, effective July 1, 2024:
- Power of Attorney Requirement: The first refund request must be accompanied by a power of attorney.
- Invoice Documentation: Electronic copies of invoices are required for refund requests exceeding 1,000 euros (or 250 euros for fuel).
These changes indicate a strategic shift in tax policy, focusing on sustainability and cost-of-living considerations. Businesses, particularly those involved in energy and food supply, should review their strategies to align with these new regulations.
