The Value Added Tax (VAT) is an indirect tax that falls on the production of companies and, therefore, on the purchase of products by the consumer. We say that the concept of VAT is indirect because it is not received directly by the taxpayer -as it happens with other types of taxes- but by the person who sells the product.
Now that we know what VAT means and how it differs from other taxes, it is worth knowing the different modalities that we can find in our day to day.
VAT rates
When buying a product or enjoying a service, there are three groups of value added taxes that you should know:
- General VAT: It is 21% and is applied to practically all products and services (except those indicated below)
- Reduced VAT: Equivalent to 10% and is applied to transport, horticultural plants and most food (except those contemplated in the super-reduced VAT)
- Super-reduced VAT: Equivalent to 4% and is applied to basic necessities such as some foods (bread, milk, fruit, cereal, cheese), medicines, books, wheelchairs and prosthetics, among others.
The quarterly VAT return
Because the concept of Value Added Tax is not applied only to the buying and selling activities that we carry out as consumers; If we are in charge of a company or are self-employed, we must know the quarterly VAT term: the amount we pay to the Treasury each quarter for our economic activity. Knowing this:
- Input VAT: is the amount of VAT that we pay for products and services that are intrinsically related to our economic activity.
- Output VAT or accrued VAT: Both terms refer to the amount of VAT that we have collected for the performance of our economic activity.
Finally, we recommend that you know how to calculate VAT, to know the price that you should finally apply to a product. In addition, you can also get VAT included in the total price.