There is a wide variety of indirect taxes and parafiscal charges that apply to the different elements of coverage that can be included under a motor insurance policy in Spain. You can read our blog to learn more about taxation of motor insurance policies in Europe, this blog focuses on some of the specifics to consider in Spain.
Which taxes are payable in relation to motor insurance policies in Spain?
The application of Insurance Premium Tax (IPT) and a surcharge to finance winding-up activity are common across all classes of insurance typically found in a motor insurance policy, with the latter being declared to Consorcio de Compensación de Seguros (“Consorcio”). For coverage such as roadside assistance and legal protection, this is likely to be the extent of the taxes due.
Additional Consorcio surcharges are due on other elements of the cover. For example:
Personal accident coverage attracts a separate surcharge for direct damages to person.
Motor damage and motor third-party liability insurance entail the application of fixed fees on a per-vehicle basis.
Contributions to the Motor Guarantee Fund in Spain (also administered by Consorcio) are currently due on compulsory motor third-party liability coverage. It is worth highlighting that this obligation should cease for insurers writing on a freedom of services or establishment basis in light of Directive 2021/2118, subject to domestic implementation of the Directive expected by 23 December 2023.
The Green Card regime applies to compulsory motor third-party liability coverage per Green Card issued. If no Green Card is issued, this does not apply.
How are taxes on motor insurance policies calculated in Spain?
Most motor insurance taxes and parafiscal charges are calculated as a percentage of the taxable premium. These taxes are then added to the premium and charged directly to the insured.
There are some exceptions including direct damages surcharge and fixed fees. The direct damages surcharge applicable to accident coverage is a percentage that applies to the sum insured rather than the taxable premium.
Additionally, there are fixed fees due to Consorcio on motor damage and motor third-party liability coverage that vary based on the type of vehicle. Categories with their own fixed fee include mopeds, passenger cars, and industrial vehicles, amongst many others.
The fixed fee for the Green Card should be treated as insurer-borne and is therefore not a cost directly passed onto the insured.
What vehicles are exempt from tax?
Spain has a fairly narrow scope for any IPT exemption under a motor insurance policy in comparison to other European jurisdictions.
As a rule, there are currently no exemptions that apply to particular categories of vehicle but there is an exemption for certain international coverage. In the case of any goods in transit insurance relating to cross-border transport that is included under a motor policy, that portion can be treated as exempt from IPT. The Consorcio Surcharge to Finance Winding-up Activity would remain applicable in these circumstances though.
The Spanish government has published the much-anticipated draft regulation with the framework for implementing mandatory B2B e-invoicing.
The proposed legislation outlines the operation of the Spanish e-invoicing system. Its main feature is the reliance on the principles of interoperability of e-invoice formats and interconnectivity of e-invoicing platforms. The goal is to promote digitalization (particularly for smaller companies), reduce late invoice payments and save on administrative costs such as the management of invoices.
The draft Royal Decree provides further details to the Law for Creation and Growth of companies published in September 2022, which initially establishes the e-invoicing obligation for companies and professionals.
Scope of the Spanish B2B e-invoicing mandate
All companies and professionals required to issue invoices under Spanish law will be obliged to do so electronically. This applies to B2B operations with a few excluded transactions, such as: when issuing a simplified invoice, issuing an invoice voluntarily when there is no such obligation to do so under Spanish rules and in other cases that the government may regulate in the future.
However, the obligation does not apply if one of the parties to the transaction does not have an established business, a fixed establishment or habitual business residence in Spanish territory where invoices are directly issued.
Main requirements of the Spanish e-invoicing system
The Spanish e-invoicing system will consist of privately owned electronic invoicing platforms and the public electronic invoicing solution managed by the State Tax Administration Agency. Taxpayers under scope must send and receive e-invoices through one of these two means and will be able to use both in parallel.
Other important characteristics and requirements of this system are:
E-invoices can be issued in different accepted formats.
Regardless of the chosen method, issuers must send an exact copy of each e-invoice to the public e-invoicing solution, in the Facturae format, which will serve as a central repository.
Application of an advanced electronic signature on e-invoices transmitted via a private platform will be mandatory to ensure integrity and authenticity (I&A).
All e-invoices must be identified with a unique code.
The invoice recipient must report e-invoice acceptance or refusal and the effective payment date.
There are minimum requirements for operating as a private e-invoice platform, such as a proven capacity to connect with the public e-invoicing solution, providing free interconnection and interoperability with other platforms.
Private e-invoice platform operators will be obligated to interconnect with any other private platform within the Spanish e-invoicing system within one month of their request.
The public e-invoicing solution will be deemed as the default exchange system for taxpayers who do not explicitly choose to receive e-invoices through a private platform.
Accepted e-invoice formats
The proposed Royal Decree defines an e-invoice as a structured document, which means that a PDF will no longer be considered an electronic invoice. Taxpayers will be required to issue e-invoices using one of the accepted formats:
XML CEFACT/ONU as specified in the XML schemas 16B (SCRDM – CII)
UBL as defined in the ISO/IEC 19845:2015 standard
EDIFACT per the ISO 9735 standard
Facturae, in the version for invoicing between entrepreneurs and professionals in force at any given time
Additionally, in line with the principle of interoperability, private e-invoicing platforms must be able to convert e-invoices into all supported formats while preserving I&A.
Communication of e-invoice status
The invoice recipient must communicate the e-invoice status to the invoice issuer within the maximum deadline of four calendar days counted from the date of the reported status.
Mandatory statuses comprise the following:
a) Commercial Acceptance or Rejection of the invoice and its date
b) Full effective payment of the invoice and its date
Additionally, the draft regulation establishes optional statuses:
c) Partial commercial acceptance or rejection of the invoice and its date
d) Partial payment of the invoice, amount paid, and its date
e) Assignment of the invoice to a third party for collection or payment, with identification of the assignee and the date of assignment
Implementation timelines
The Royal Decree is currently in draft form but will be effective 12 months after its official publication on the Spanish Official Gazette (BOE). Following the Law for Creation and Growth of companies, the 12-month-timeline will apply to entrepreneurs and professionals whose annual turnover is over €8 million, and for the remaining taxpayers under scope the deadline is 24 months.
In the first year from the regulation’s effective date, companies under the e-invoicing obligation must attach a PDF file to the legal e-invoice to ensure readability to counterparties not yet in scope – unless the recipient agrees to receive it in the original format.
The obligation to report the e-invoice statuses will come into effect 36 months after the publication of the Royal Decree for entrepreneurs with an annual turnover below €6 million and 48 months after the publication of the Royal Decree for professionals below the same threshold.
As this is still a draft and certain details remain to be established, taxpayers can expect changes before publication of the final version. Additionally, until 10 July 2023, the draft regulation is open for comments from the general public.
Another important note is that the entry into force of this draft Royal Decree is subject to Spain obtaining derogation from Articles 218 and 232 of the EU VAT Directive before the EU Commission. Although this is a formal step and there is no indication that the Commission would not grant the derogation, until it happens the new Spanish rules cannot enter into force.
For an overview about other VAT-related requirements in Spain read this comprehensive page about VAT compliance in Spain.
In July 2023, the French authorities postponed the implementation timeline. A new timeline will be announced with the adoption of the finance law for 2024.
When your organisation trades cross-border, regular changes to the regulatory landscape are a given. Whether those changes are brand-new requirements in a country where you do business or the evolution of existing legislation, you must be ahead of the developments to remain compliant.
With global tax authorities continually making progress with their digitization strategies, the e-invoicing revolution continues at speed.
In this quarter’s instalment of our VAT Snapshot webinar, Kelly Muniz and Enis Gencer from Sovos’ Regulatory Analysis and Design team, will look in detail at anticipated changes in countries with emerging digital strategies and discuss updates to some of the more established regimes.
They will cover:
The introduction of continuous transaction controls (CTCs) in Israel and Malaysia in 2024
Expected developments in Spain, including the Bizkaia Batuz mandate effective from January 2024
Latest developments in e-invoicing in France and the role of Partner Dematerialization Platforms (PDP)
Join our 30-minute update on 13 July for the latest news, and for an opportunity to put your questions to our speakers.
The long-awaited Royal Decree, establishing invoicing and billing software requirements to secure Spanish antifraud regulations, has been officially published by the Spanish Ministry of Finance.
The taxpayers and SIF developers, defined further below in this article, must be aware of several new official deadlines set forth by the Spanish tax authority in the Royal Decree:
From 1 July 2025: Only ordinary SIF or Verifactu-approved billing systems may be used to prepare and submit invoices for the taxpayers under scope
Billing software developers and sellers must offer their product fully adapted within a maximum period of nine months from the approval of the Ministerial Order that specifies all the technical details, which is still to be approved
Therefore, companies that fall within scope must ensure their computer systems are adapted to this regulation as of 1 July 2025.
Looking for more information on tax compliance in Spain? This page can help.
Update: 10 February 2023 by Carolina Silva
Understanding Spain’s Verifactu system
The Spanish government is pursuing various routes for digitizing tax controls, including introducing software requirements on the billing system.
In February 2022, Spain published a Draft Royal Decree establishing invoicing and billing software requirements to secure Spanish antifraud regulations.
The Draft Decree ensures billing software meet the legal requirements of integrity, conservation, accessibility, legibility, traceability and inalterability of billing records. It sets standards for systems known as SIF (Sistemas Informaticos de Facturación).
To comply with SIF standards, taxpayers may use a Verifactu system – a verifiable invoice issuance system which is further detailed later in this article.
Since publishing the Draft Decree and concluding its public consultation, the Spanish tax authority has released draft technical specifications for the Verifactu system and a list of modifications to be introduced to the Draft Decree. One is the estimated date of entry into force of the billing software requirements.
What is a Verifactu billing system?
Among the many SIF requirements established in the Draft Decree is the capability to generate a billing record in XML format for each sale of goods or provision of services. This needs to be sent to the tax authority simultaneously or immediately before the issuance of the invoice.
The Draft Decree establishes two alternative systems taxpayers can adopt to comply with the technical standards of the SIF: the ordinary SIF and the Verifactu system.
A Verifactu system is a verifiable invoice issuance system, and its adoption is voluntary under the Draft Decree. Taxpayers who use computer billing systems to comply with invoicing obligations may choose to continuously send all the billing records generated by their systems to the tax authority.
A Verifactu billing system complies with all the technical obligations imposed by the Draft Decree., Taxpayers use the system to effectively send all billing records electronically in a continuous, automatic, consecutive, instantaneous, and reliable manner.
Benefits of the Verifactu billing system
A taxpayer opts for a “verifiable invoice issuance system” by systematically initiating the transmission of billing records to the tax authority. If the systems are Verifactu, invoices must include a phrase stating so.
There are several benefits for taxpayers who decide to opt for a Verifactu system:
As companies send the billing records to the tax authority, the formal acceptance response will automatically incorporate the information from such records into the taxpayer’s book of issued invoices.
Current deadlines
Taxpayers and SIF developers must be aware of several deadlines set forth by the Spanish tax authority. These are still part of the draft development of the SIF and official deadlines are outstanding:
From 1 July 2024: Only ordinary SIF or Verifactu-approved billing systems may be used to prepare and submit invoices. The Draft Decree deadline was 1 January 2024, but the Spanish authority postponed it following a public consultation.
Billing software developers and sellers must offer their product fully adapted within a maximum period of nine months from the regulation’s entry into force.
Also within nine months, the Spanish tax authority must ensure that the service for receiving billing records for the Verifactu systems becomes available.
What’s next?
Although still in draft form, it’s expected there will be official publication of the Draft Royal Decree – along with a Ministerial Order detailing the technical and functional specifications of the billing systems. Official publication of the Verifactu technical specifications is to come.
The Draft Decree explicitly states that its implementation is compatible with an electronic invoicing mandate which is also underway in Spain. Therefore, taxpayers must ready themselves to comply.
For an overview about other VAT-related requirements in Spain read this comprehensive page about VAT compliance in Spain.
Update: 24 February 2022 by Victor Duarte
The Spanish Ministry of Finance has published a draft resolution that will – once adopted – establish the requirements for software and systems that support the billing processes of businesses and professionals. This law will have a significant impact on the current invoice issuance processes. It will require implementing new invoice content requirements, including a QR code, and the generation of billing records by January 2024.
The regulation is also intended to adapt the Spanish business sector, especially SMEs, micro-enterprises, and the self-employed, to the demands of digitization. For this, it is considered necessary to standardise and modernise the computer programs that support the accounting, billing, and management of businesses and entrepreneurs.
Scope of the regulation
The regulation establishes the requirements that any system must meet to guarantee the integrity, conservation, accessibility, legibility, traceability and inalterability of the billing records without interpolations, omissions or alterations.
The new rules established in the regulation will apply to:
Taxpayers subject to corporate tax (IS), except for exempt or partially exempt entities.
Taxpayers subject to income tax for physical persons (IRPF) who obtain income from economic activities.
Taxpayers subject to income tax for non-residents (IRNR) with a permanent establishment in Spain.
Entities under the income allocation system carrying out economic activities.
Companies that do not fall within the above categories do not need to comply, but those who do must ensure their computer systems are adapted to this regulation as of 1 January 2024.
New invoice content requirements: ID and QR codes
Invoices generated by the computer systems or electronic systems and programs that support the billing processes of businesses and professionals must include an alphanumeric identification code and a QR code, generated per the technical and functional specifications established by the Ministry of Finance.
Billing system requirements
The computer systems that support billing processes must have the capability to:
Generate a billing record for each delivery of goods or provision of services, simultaneously or immediately before the issuance of the invoice.
The computer system must be able to send all the billing records generated to the State Tax Administration Agency (AEAT) in a continuous, secure, correct, complete, automatic, consecutive, instantaneous, and reliable manner.
The system must be provided with traceability, verifying the sequence of data creation. It will create an event log that collects all the system operations and incidents during its use.
The records created may not be altered by the user or any internal or external means.
The systems must add a fingerprint or ‘hash’ to the billing records, according to the specifications and the electronic signature.
To achieve these ends, all computer systems must certify that they ensure the commitment to comply with all the requirements established in this regulation through a “responsible statement”. The Ministry of Finance will establish the minimum content of this statement later in a new resolution.
Billing record content and its optional transmission
The billing records must comply with several content requirements laid down by the regulation.
The taxpayers using computer systems to comply with their invoicing obligations may voluntarily send all its billing records generated by the computer systems to the AEAT automatically by electronic means. The response of a formal acceptance message from the AEAT will automatically mean that these records have been incorporated into the taxpayer’s sales and income ledgers.
Tax administration audits
The AEAT may appear in person where the computer system is located or used and may require full and immediate access to the data record, obtaining, where appropriate, the username, password and any other security key that is necessary for full access.
The AEAT may request a copy of the billing records, which companies may provide in electronic format through physical support or by electronic means.
Application to the B2B e-invoicing mandate
The regulation doesn’t include any specific rule for the B2B e-invoice mandate draft decree currently being discussed in Congress and waiting for approval. However, if the mandate is approved, all the B2B e-invoices issued under this draft decree will have to comply with all the new rules established in this regulation.
Next steps
While this new regulation does not seem to take Spain further down the continuous transaction control (CTC) route, the proposal has clear similarities with Portugal’s invoice requirements.
The draft resolution establishing these is currently open for public consultation until 11 March 2022. Once this resolution is approved, the Ministry of Finance will publish the technical and functional specifications needed to comply with the new requirements and the structure, content, detail, format, design and characteristics of the information that companies must include in the billing records.
The Ministry of Finance will also publish the specifications of the signature policy and the requirements that the fingerprint or ‘hash’ must meet. Once these details are published, it will be clearer whether Spain is going down the Portuguese route or carving out its own path.
Take Action
Need help staying up to date with the latest VAT and compliance updates in Spain that may impact your business? Get in touch with Sovos’ team of experts today.
TRENDS AND UPDATES ON VAT COMPLIANCE
Trends 13th Edition 2022
TRENDS AND UPDATES ON VAT COMPLIANCE
Trends 13th Edition 2022
Welcome to the 13th edition of Sovos’ annual Trends report where we put a spotlight on current and near-term legal requirements across regions and VAT compliance domains.
This report provides a comprehensive look at the regulatory landscape as governments across the globe are enacting complex new policies to enforce VAT mandates. It examines the demanding and unprecedented insight now required into your economic data so that regulatory authorities enforce standards and close revenue gaps.
This year’s report examines the evolution of law and practice around the four emerging megatrends that Sovos experts identified in the 12th edition. These trends, many of which revolve around tax compliance and controls being ‘always on’, have the potential to drive change in the way organizations approach regulatory reporting and manage compliance.
Authored by a team of international tax compliance experts, we provide extensive recommendations on how companies can prepare for and thrive through these changes.
Get the report
The four mega-trends that we examine are:
Continuous Transaction Controls (CTCs) – Countries with existing CTC regimes are seeing improvements in revenue collection and economic transparency. Now, other countries in Europe, Asia and Africa are moving away from post-audit regulation to adoption of these CTC-inspired approaches. The report highlights how countries like France and Hungary have accelerated their transition to CTCs, and how many jurisdictions are combining invoice controls with CTC transport documents, thereby expanding their real-time reach from financial to physical supply chains.
A shift toward destination taxability for certain cross-border transactions – Cross-border services have historically often escaped VAT collection in the country of the consumer. Due to a large increase of cross-border trade in low-value goods and digital services over the past decade, administrations are taking significant measures to tax such supplies in the country of consumption or destination.
Aggregator liability – With the increase of tax reporting or e-invoicing obligations across different taxpayer categories, tax administrations are increasingly looking for ways to concentrate tax reporting liability in platforms that naturally aggregate large numbers of transactions already. Ecommerce marketplaces and business transaction management cloud vendors will increasingly be on the hook for sending data from companies on their networks to the government, potentially even inheriting liability for paying their taxes. The report notes how the July 2021 introduction of sweeping changes in e-commerce VAT legislation via OSS and IOSS are confirming this trend.
E-accounting and e-assessment – Combining CTCs with obligations to synchronize entire accounting ledgers makes onsite audit necessary only in cases showing major anomalies across these rich data sources. Over time, the objective is for VAT returns and other tax reports to be prefilled by the tax administration based on taxpayers’ own, strongly authenticated source system data. A brief deep-dive into the origins and potential future of SAF‑T shows how this trend is evolving to become a solid companion to CTCs globally.
CTCs have emerged as the primary concern for multinational companies looking to ensure compliance despite growing diversity in VAT enforcement approaches. Tax authorities are steadfast in their commitment to closing the VAT gap and will use all tools at their disposal to collect revenue owed. This holds especially true in the aftermath of COVID-19, when governments are expected to face unprecedented budget shortfalls.
The potential costs and risks associated with the trends highlighted in the report cannot be effectively mitigated with a reactive or opportunistic approach. The digital transformation of tax administration can – if approached as just an evolution of the legacy ‘post audit’ VAT world – significantly contract the digital transformation of businesses. This report suggests an analysis framework that companies can use to ensure ongoing VAT compliance whilst maximizing the opportunities of modern information and communication technologies for their own benefit.
In addition, Trends includes a major review of the country and regional requirement profiles. These profiles provide a snapshot of current and near-term planned legal requirements across the different VAT compliance domains.
SII Spain: An Overview
SII Spain: Suministro Inmediato de Información
SII Spain is an electronic VAT system that affects thousands of large companies across the country. It can seem complicated, but it doesn’t have to be.
The mandate is demanding, with the impacted groups having to stay on top of the four-day reporting period. If your business meets the criteria of SII Spain, you will likely be feeling the pressure of having to comply.
Sovos is here to help, breaking down Spain’s SII system into:
How companies can comply (and what to expect if they don’t)
Key details about the mandate and how it’s developed over time
How Sovos can ease the burden for you at every stage
SII Spain is only one of the country’s tax compliance obligations. Our Spain VAT Compliance overview can help you stay on top of other mandates and obligations you may be subject to.
The mandate affects Spanish companies above an annual turnover threshold of over €6 million. It’s also applicable to VAT business groups, companies that participate in the monthly tax refund system known as REDEME and other businesses that voluntarily sign up.
Where is SII applicable in Spain?
Spain’s compliance obligations are further complicated by the country being divided into regions. Depending on where your business is based, you may well be subject to a specific combination of tax mandates.
The distinct areas where SII is applicable include:
Mainland Spain
Canary Islands
Bizkaia
Gipuzkoa
Alava
Quick facts about SII Spain
The Spanish mandate applies to companies with an annual turnover above €6 million, companies that are part of VAT groups, and companies using the REDEME system.
The following records must be sent to the tax authority:
Registered book of issued invoices
Registered book of received invoices
Registered book of investment goods
Registered book of certain intra-community operations
The transmission of the information must be via web services available to exchange XML messages.
Some formal obligations are reduced as taxpayers will no longer be required to file the information returns form 347 (third-party information), form 340 (transactions in register books) and form 390 (VAT annual summary).
In 2020 the Spanish tax administration introduced a service to pre-populate the periodic VAT return (Modelo 303) using the information taxpayers supplied via the SII.
Spain: Rollout dates
2 January 2017: The immediate supply of information on a voluntary basis for taxpayers in Spain begins.
1 July 2017: The mandatory phase of the immediate supply of information for taxpayers under the scope of the mandate begins.
1 January 2018: The period to supply information was reduced from 8 days to 4 days. The mandate also extended to other Spanish territories (Basque Provinces and Canary Islands).
1 January 2020: Introduction of a ledger to record operations related to the sale of goods in consignment.
4 January 2021: Introduction of new validations and fields that record the sales of goods in consignment
Penalties: What happens if you don’t comply
Omissions or inaccuracies in the information reporting obligation have a penalty of up to 1% of the total amount missed, with a maximum of €6,000.
Late reporting of real-time electronic VAT ledgers will trigger a penalty of 0.5% of the total amount reported, with a minimum of €300 and a maximum of €6,000 per quarter.
Errors or omissions in the Registered book of certain intra-community transactions and Registered book of Investment goods have a fixed penalty of €150.
Sovos Helps Companies Stay Compliant with Spain’s SII
Sovos serves as a true one-stop shop for managing all VAT compliance obligations in Spain and across the globe.
Sovos supports the Suministro Inmediato de Información (SII) platform, ensuring our customers remain compliant with the legal and technical framework developed by the Spanish tax authority (AEAT).
Sovos experts continually monitor, interpret, and codify these changes into our software, reducing the compliance burden on your tax and IT teams.
Spain B2B E-invoicing: Businesses are under varying obligations where e-invoicing is concerned, largely depending on the nature of transactions. Mandatory B2B e-invoicing is anticipated to be implemented from 2024.
Bizkaia Batuz: Batuz is a tax control strategy governed by the government of Bizkaia which applies to all companies and taxpayers that are subject to the province’s regulations.
TicketBAI: TicketBAI is an e-invoicing mandate from the numerous tax authorities in the Basque Country which covers Álava, Biscay, and Gipiuzkoa. It outlines obligations for both individuals and companies to use software to report invoice data to the Tax Administration in real-time.
The Suministro Inmediato de Información (SII) is a platform to submit invoice data to the tax authority in Spain. Taxable persons who are in scope must report invoice data within four business days following the date of issue.
In 2020 the tax administration announced a new version of the SII, introducing a ledger to record operations related to the sale of goods in consignment. This came into effect on 1 January 2021.
The Suministro Inmediato de Información (SII) was introduced on 2 January 2017 on a voluntary basis, extending to a mandatory basis on 1 July 2017. Since then, there have been changes and additional requirements
SII applies to multiple regions in Spain, including Mainland Spain, the Canary Islands, Álava, Biskaia, and Gipiuzkoa.
This was not the case when the legislation originally came into effect, as it excluded the likes of the Canary Islands, Ceuta, Melilla, Basque Country and Navarra.
The Immediate Supply of Information (Suministro Inmediato de información) SII is a system for keeping the Value Added Tax record books in the local Tax Authority’s electronic headquarters by supplying VAT-relevant information on a near-real-time basis.
Insurance Premium Tax (IPT) regulations in Spain are among the most intricate within the European Union.
Compliance is particularly challenging due to the involvement of multiple tax authorities. These include the central tax administration – commonly referred to as “HACIENDA/AEAT” (Agencia Estatal de Administración Tributaria) – as well as four provincial tax offices in the Basque Country: Álava, Guipúzkoa, Navarra, and Bizkaia.
In addition to IPT, insurers are also subject to extraordinary surcharges on some of the risks. These surcharges must be paid to the Consorcio de Compensación de Seguros (Consorcio). Furthermore, fire brigade contributions are due either to GESTORA (Gestora de Conciertos para la Contribución a los Servicios de Extinción de Incendios) if the insurance company is a member of GESTORA, or to over 300 municipalities without membership. Municipal FBC (MFBC) may also be payable to certain municipalities within the Madrid region.
Given this complex landscape, navigating Spain’s IPT framework and maintaining compliance can be particularly demanding. To support insurers in this effort, SOVOS has developed this guide to address key questions and provide clarity on the nuances of Insurance Premium Taxation in Spain.
The Spanish Insurance Premium Tax (IPT) landscape
While not all taxes apply to every insurance risk, the applicable obligations vary based on the nature of the coverage. Navigating Spain’s Insurance Premium Tax (IPT) framework requires a solid understanding of more than five distinct taxes and contributions.
Below are the most encountered taxes and surcharges in Spain:
Insurance Premium Tax (IPT)
Additional surcharges:
CCS surcharges: MOD10, MOD11, MOD20, MOD50
Fire Brigade Charges: FBC and MFBC (municipal FBC)
Carta Verde (Green Card)
Environmental Damage Compensation Fund Contribution (ENV)
Basics for Insurance Premium Tax (IPT)
Where should IPT be filed?
Insurance Premium Tax (IPT) in Spain must be paid to one of five different tax authorities, depending on the postcode of the insured risk location. While most liabilities are reported to the central tax administration, known as “Hacienda” (Agencia Estatal de Administración Tributaria), some Basque regions have their own tax offices.
The first two digits of the five-digit Spanish postcode determine the appropriate tax authority for IPT reporting. If the postcode begins with one of the designated codes for the Basque provinces, as listed below, IPT must be paid to the corresponding regional tax office. For all other postcodes, IPT is payable to the central tax administration.
Navarra – 31
Álava – 01
Guipúzcoa – 20
Vizcaya – 48
In addition to registering with the central tax administration (Hacienda), insurers must register with the relevant provincial tax office corresponding to the location of the insured risk, where applicable.
What is the IPT rate in Spain?
The current IPT rate in Spain is 8% as of 2021, and it is applied to all classes of insurance, with some exemptions.
Are there IPT exemptions in Spain?
Certain classes of insurance businesses are exempt from Insurance Premium Tax (IPT) in Spain. These exemptions typically include life, health, reinsurance, export credit, suretyship, and international coverage across various sectors such as marine and aviation. Agricultural risks may also qualify for exemption, depending on the specific circumstances.
What is the basis of Spain’s IPT calculation?
The basis for calculating Insurance Premium Tax (IPT) in Spain is the total premium amount payable by the insured. Depending on how the Fire Brigade Charge (FBC /MFBC) is levied, it may also be included in the taxable base for IPT purposes.
Who is liable for IPT in Spain?
The insurer is responsible for calculating, collecting and remitting the Insurance Premium Tax (IPT) to the appropriate tax authority, in accordance with the filing and submission requirements established by each respective office.
How to file IPT in Spain?
Although Insurance Premium Tax (IPT) is classified as an indirect tax, insurance companies are not currently required to submit real-time transactional data through Spain’s Immediate Supply of Information (SSI) system, which is already in use for VAT reporting. However, future developments are expected to move IPT submissions toward greater automation, aligning more closely with VAT processes. At present, IPT reporting involves both monthly and annual declarations:
Monthly Declaration – Modelo 430
Central Administration (Hacienda) and Navarra: Due by the 20th of the month following the reporting period
Álava, Guipúzcoa, and Vizcaya: Due by the 25th of the month following the reporting period
Annual Declaration – Modelo 480 Due by end of January of the year following the reporting period
IPT filings in Spain are submitted online and may require varying levels of detail, such as a breakdown by covered risks.
Basics for Other Taxes
CCS or Modellos
CCS or Modelos are administered by Consorcio de Compensación de Seguros (Consorcio). One of the Consorcio’s primary responsibilities is to compensate policyholders when the Spanish government officially declares an extraordinary risk event.
Extraordinary risks generally fall into the following categories:
Natural disasters, such as floods or earthquakes
Violent acts, including terrorism, civil unrest, and similar events
Actions by armed forces or law enforcement during peacetime
Each Modelo is subject to its own tax rate and calculation methodology. Below is a high-level summary:
MOD10 and MOD11: The calculation for Modelo 10 is relatively complex. The applicable rate depends on several factors, including the type of risk covered, policy duration, taxable base, and indemnity limits. The sum insured typically serves as the basis for calculation.
MOD20 (NGF): A rate of 1.5% applies to the taxable premium for compulsory coverage. If the coverage is not mandatory, NFG is not due.
MOD50 (CLEA): A flat rate of 0.15% applies to the taxable premium across all classes of business, with limited exemptions.
Returns must be submitted on a monthly basis via a dedicated online portal that requires detailed policy-level information. Payment is made through direct debit, which is automatically triggered upon submission of the return.
Fire Brigade Charges (FBC and MFBC)
The Fire Brigade Charge (FBC) is a surcharge applied to insurance premiums that include fire coverage. Depending on the nature of the policy, the tax may be levied on the full premium or only on the portion attributable to fire risk.
Provided that the insurance company is a member of Gestora de Conciertos para la Contribución a los Servicios de Extinción de Incendios (GESTORA), the collection of FBC is centralized by this body. This body operates under the umbrella of UNESPA—the Spanish Association of Insurers and Reinsurers—and represents over 96% of insurance companies in Spain.
However, in the absence of membership, the insurance company should deal with 300+ municipalities in Spain because FBC amounts must be paid individually to the respective municipalities based on the postcode of the insured risks. Therefore, it is strongly recommended to become a member of GESTORA, as this significantly reduces the administrative burden associated with FBC payments.
Two standard rates apply:
5% for standalone fire policies
5% (i.e., 5% applied to 50% of the premium) for multi-risk policies that include fire coverage
Joining GESTORA is administratively challenging, as new members are accepted only once per year. Insurers must submit a formal application during a limited registration window – typically one month in the spring.
FBC settlement spans five years and consists of four phases:
Prepayment: Based on an annual report of property and fire policies written in the previous year, insurers make a prepayment at the beginning of the following year.
Annual Declaration: In the second year, insurers submit actual premium data for the prior year.
Adjustment: In the fourth year, the difference between the prepayment and actual premiums is reconciled.
Final Adjustment: In the fifth year, any remaining discrepancies are corrected.
In addition to the National FBC, insurance companies may be subject to a Municipal Fire Brigade Charge (MFBC) if the insured risks are located in the Region of Madrid, because some Madrid Councils have implemented a municipal levy (MFBC). MFBC rates vary by municipality and coverage type, ranging from 5% to 30%, and may be structured as either fixed or variable. The declaration period is typically annual.
