Spain introduces VAT rate updates

Spain has introduced new VAT adjustments, with the most significant changes being the end of the temporary zero VAT rate on essential foodstuffs, now taxed at 2% until December 31, 2024, and shifting to 4% from January 1, 2025. Olive oil will benefit from the 4% reduced VAT rate starting January 2025, while seed oils and pasta see a VAT increase from 5% to 7.5%. Additionally, VAT rates for electricity, natural gas, and wood for energy will rise to 10% in 2024.

Certain changes in VAT rates were introduced in Spain. That reflects the Spanish government's ongoing efforts to balance fiscal policy with the needs of consumers and the economy.

The changes are:

• The temporary zero VAT rate on essential foodstuffs in Spain ended on September 30, 2024. These products are now subject to a reduced VAT rate of 4%.
• In a significant update, olive oil will be classified as an essential foodstuff and will benefit from the super reduced VAT rate of 4%, starting January 1, 2025.

Starting from October 1, 2024, and until December 31, 2024, the new applicable VAT rate will increase to 2%. The basic foodstuffs included in the temporary 2% VAT rate are the following:

• Common bread, including frozen bread.
• Flour for bread.
• Animal milk
• Cheese
• Eggs
• Fruits, vegetables, legumes, and cereals that are considered natural products.
• Olive oil

Separately, the supplies of specific products, namely seed oils and pasta, previously subject to a temporary 5%, are now subject to 7.5% VAT rate, effective from October 1, 2024, and until December 31, 2024.

Additionally, the VAT rates for certain energy products have been adjusted.

• The rates for electricity, natural gas, and wood for energy have seen changes, with increased rates ranging from 10% to 5% during specific periods.
• Electricity was raised from 5% (temporary reduced rate during 2023) to 10% VAT rate from 1 January to 31 December 2024.
• Natural gas and wood for energy are also subject to a 10% VAT rate from 1 January to 31 March 2024, instead of the former 5%.