VAT

You might think that because you're young and don't work, you have nothing to do with taxes, that taxes are only for older people. However, you are also paying taxes. So you are also taxpayers.

For example, every time you buy a soft drink, a bag of chips, a bun, a pair of pants, or a pair of sneakers, every time you go to the movies, get on a train or bus, or top up your cell phone card, you are paying taxes.

They are taxes on consumption. The best known of these is VAT (Value Added Tax), which you've probably heard of. This is a tax paid every time you buy an item or product or when someone provides a service or does work for you, whether it's because you have a drink in a bar or restaurant or because a plumber or electrician repairs your home. The thing is, we don't realize it because it's usually included in the price. If you look closely, many tickets list the VAT amount, while others include it in the price (the ticket says VAT included). Well, it's so that whoever buys something knows that they are paying for it and that the person selling that thing has paid it into the Treasury so that the buyer doesn't have to do it. Therefore, it is important to always ask for the invoice or receipt, even if someone might tell us that if we don't give us the receipt, they will charge us a lower price. Otherwise, how can we prove that we have paid so we can claim later if what we bought is defective or the repair was poorly done?

VAT is one of the indirect taxes (remember the classification we made between direct and indirect taxes), the most important of all, since the money obtained from it is well over half of the total obtained from all indirect taxes.

It is interesting to know why this tax is called “Value Added Tax.” To understand this, we must keep in mind that every product we buy involves a long process with many stages, each of which involves different entrepreneurs and professionals. Imagine a simple cotton t-shirt. First, the plant had to be grown, the cotton harvested, then spun into fabric, then cut and shaped into a T-shirt, dyed or printed, and finally distributed so that it reached the store in our city where we could buy it. At each stage the garment acquires more value, value is added to it. Each company involved must pay the VAT corresponding to the increase in value that their work has incorporated into the future t-shirt to the Treasury, but this VAT they have paid is then "passed on" to the company involved in the next phase, and so on until it reaches us, the buyers, who are the ones who will ultimately pay the tax within the price of our t-shirt.

It remains to be said that the amount we pay in VAT is not always the same for all the services and things we buy. There is a general VAT of 21%. There is a reduced VAT of 10% paid on everyday items, including food in general, housing, restaurants, and museums. And finally, there's a super-reduced VAT of 4% for essential goods, such as bread, milk, fruit, eggs, vegetables, medicines, and also books and newspapers. In addition, there are goods and services that, due to their importance, do not pay VAT, that is, they are exempt, as is the case with health and education services or dental services.

Finally, it's important to know that VAT is a tax paid not only in Spain but also in all other countries of the European Union, although there are some small differences between them, mainly in terms of the percentages that, as we saw earlier, are applied to different items. It is therefore said that VAT is a “harmonized” tax in the European Union. This means that if you travel to any of the EU countries, you will also be paying VAT on the price of the items you purchase, although the corresponding amount of tax may be slightly higher or lower than what you would pay in Spain for the same item.