In line with the 2009 Spanish budget released in September last year, the rate of IVA will rise with effect from 1st July 2010.  In Spain, there are three different rates of IVA:

• The standard rate, currently 16%, will increase to 18%
• The higher reduced rate, currently 7%, will increase to 8%
• The reduced rate of 4% which is charged on "basic necessities" will remain unchanged.

Since this increase is due to come into effect within the next month, perhaps now is a good time to outline exactly what rate of tax we pay on which products/services in Spain

The Reduced Rate, currently 4% – remains at 4%

• This is applied to items considered to be basic necessities such as:
• Bread, frozen dough, eggs, cheese, milk, beans and fruit and vegetables
• Books, magazines and newspapers
• School material with the exception of electronic items
• Medicines for human use
• Vehicles for the disabled, wheel chairs and collective transport for the disabled
• Prosthesis and implants
• Official protection housing

The Higher Reduced rate, currently 7%  – increases to 8%

• Foodstuffs in general, other then those listed above
• Animals destined for human consumption or breeding
• Items used in agricultural, farming and forestry activities, such as seeds and fertilisers
• Contact lenses and glasses
• Disabled lifts and items for the diagnosis of illnesses
• Health assistance services, social services, and dental work
• Imported artworks and antiques
• Hairdressing
• The transfer of housing, including garages and annexes
• House construction (between promoter and contractor)
• Services supplied by artists and technicians
• Sports, cultural and recreational services, exhibitions and fairs
• Funeral services
• Hotel and restaurants
• Cleaning of streets and public gardens
• Rubbish collection
• Transport of passengers and motorway tolls.

The General Rate – currently 16% - increases to 18%

All other products, including:

• Alcoholic drinks
• Tobacco
• Petrol/Diesel
• Agricultural machinery
• CDs and DVDs
• Devices for the diagnosis and monitoring of pregnancy
• Television, radio, telephone and computer services

We may feel quite sorry for ourselves having to bear this increase but it could be worse: transactions in the UK will be subject to a 20% VAT rate with effect from January 2011.