Taxes—nobody likes them, but we all have to deal with them. In Spain, the Value Added Tax (VAT) plays a significant role in daily expenses. Starting in early 2023, the Spanish government introduced a temporary 0% VAT on essential goods to combat inflation. Since then, there have been further adjustments, including increases and changes to the scope of the tax.

In this article, we’ll break down the recent VAT changes, what they mean for your wallet, and how long these measures are expected to last. Let’s dive in!

 

What Is VAT (IVA) in Spain?

The IVA (Impuesto sobre el Valor Añadido) is Spain’s equivalent of VAT, applied to most goods and services. It operates similarly to other European countries but has its own specific rates and categories.

 

The Three VAT Rates in Spain

Spain applies three VAT rates based on the type of goods and services:

 

◉ 1. Standard Rate (21%): Covers most goods and services, such as electronics, clothing, and dining out.

◉ 2. Reduced Rate (10%): Applies to some essential goods and services, including most food items, public transportation, and hospitality.

◉ 3. Super-Reduced Rate (4%): Reserved for basic necessities like bread, milk, fruit, vegetables, and certain books or newspapers.

 

What Changed? The Recent VAT Adjustments

To combat rising inflation and support households, Spain introduced temporary changes to VAT on essential goods. Let’s take a closer look:

 

0% VAT on Essential Goods (January 2023 – October 2024)

n January 2023, the Spanish government reduced VAT on key food staples such as bread, flour, milk, cheese, fruit, vegetables, and legumes from 4% to 0%. The goal? To make everyday essentials more affordable for families struggling with rising living costs.
In June 2024, olive oil was added to the list of goods benefiting from the 0% VAT rate—a move welcomed by consumers as olive oil prices soared.ere.

 

VAT Raised to 2% (October 2024 – December 2024)

Starting October 1, 2024, VAT on essential goods—including olive oil—was raised to 2%. This transitional rate is set to last until December 31, 2024. While it’s still lower than the original 4%, many consumers have already felt the impact of slightly higher prices in supermarkets.

 

Expected Return to 4% VAT (January 2025)

From January 1, 2025, the VAT on essential goods is expected to return to its original rate of 4%, unless the government decides to extend the transitional measures or introduce new policies.

 

How Do These Changes Affect You?

Whether you’re living in Spain or just visiting, these VAT changes can influence your daily budget. Here’s a breakdown:

◉ Groceries: Between January 2023 and October 2024, staples like bread, milk, and fresh produce were tax-free, which noticeably reduced shopping bills. However, the reintroduction of VAT at 2% has brought a slight increase in prices, and this is likely to rise further if the rate returns to 4% in 2025.

◉ Energy Costs: While the VAT on groceries has fluctuated, the good news is that the VAT on energy products (electricity and gas) has been permanently reduced to 5%. This provides significant relief, especially during the colder months when energy consumption spikes.

◉ Dining Out and Hospitality: Dining out hasn’t seen major changes, with VAT for restaurants and bars remaining at 10%. However, consumers are advised to watch for price increases that could reflect inflation rather than tax changes.

Spain vs. Germany: A VAT Comparison

Curious how Spain stacks up against Germany when it comes to VAT? Here’s a quick comparison:

 

Germany

◉ 19% Standard Rate:: Applies to most goods and services.

◉ 7% Reduced Rate: Covers food, books, and cultural events.

 

Spain

◉ 21% Standard Rate:: Slightly higher than Germany’s rate.

◉ 10% Reduced Rate:: Applied to a broader range of goods and services compared to Germany.

◉ 4% Super-Reduced Rate: For basic staples, and temporarily reduced to 0% and then 2% during 2023–2024.

 

🔍 Conclusion 🔍

 

Spain generally offers lower VAT on essential goods, particularly during the temporary 0% and 2% rates. However, luxury items are taxed higher in Spain compared to Germany.

 

Tips to Save Money Despite Rising VAT

While VAT rates may be increasing, there are still ways to save money in Spain. Here are some tips:

 

◉ 1. Shop Locally and Seasonally Local markets in Spain are a goldmine for fresh produce at lower prices. By shopping seasonally, you’ll save even more.

◉ 2. Take Advantage of Reduced Energy Costs: The 5% VAT on energy makes this a great time to consider energy-efficient appliances or even solar panels to lower your bills in the long term.

◉ 3. Enjoy Spain’s Affordable Leisure Activities: While grocery prices may rise, Spain offers plenty of inexpensive or free leisure options. Beaches, parks, and cultural festivals are all excellent (and budget-friendly) ways to enjoy life.

 

Criticism of the VAT Changes

he reintroduction of VAT on essential goods has sparked criticism among consumer advocates. Many argue that the slight increases in supermarket prices disproportionately affect low-income households. Additionally, there’s concern that some retailers didn’t fully pass on the benefits of the 0% VAT to consumers, leading to less noticeable savings.

The government’s decision to raise VAT to 2% and potentially back to 4% in 2025 has been seen by some as a step backward, especially as inflation remains a pressing concern.

 

Smart Shopping: Tips and Tricks

Now that we’ve explored the details of sales tax rates, you might be wondering: „How do I deal with these changes? How can I save money while shopping?“

Here are some practical tips that could help you:

 

◉ Plan Your Shopping: Make a list before heading to the supermarket. This helps avoid impulse buys and ensures you only purchase what you really need.

◉ Take Advantage of Special Offers: Look out for discounts and promotions in stores. Many supermarkets have weekly deals where you can save big.

◉ Buy Seasonal Products: Seasonal fruits and vegetables are not only fresher but often cheaper. They usually fall under the reduced VAT rate.

◉ Compare Prices: Whether online or in-store, compare product prices. This can help you find the best deals and optimize your spending.

◉ Reassess Your Spending: Sometimes, it’s worth going out less often or opting for cheaper alternatives. This way, you can better control your overall expenses.

Conclusion: The Challenge of Sales Tax

Spain’s VAT changes reflect the government’s ongoing efforts to balance economic relief with fiscal stability. While the 0% VAT period provided significant savings for households, the gradual return to higher rates is a reminder that such measures are often temporary.

If you’re living in or planning to move to Spain, staying informed about these changes can help you plan your budget more effectively. And remember, even as VAT rates rise, Spain’s sunny lifestyle and vibrant culture remain priceless.

 

We hope these tips help you master your expat life even better! Do you have your own experiences or further recommendations on the topic of moving abroad? Feel free to leave us a comment! Share this post with others who could benefit from these tips, and stay tuned for more inspiration from life as an expat.

Your Steffi & Marius