VAT on Spanish SIM cards

[NFH]

I notice that Spain has multiple levels of VAT:

• 18% in mainland Spain and the Balearics
• 7% in the Canary Islands
• 8% in Ceuta
• 4% in Melilla

The Spanish mobile networks therefore advertise their prices excluding VAT as well as multiple prices for each region including VAT.

How does this work in practice? For example, is VAT charged based on where the usage takes place or where the customer is based? If it's the latter, what's to stop everyone from registering as being based in Melilla?

[fsotirop]

the same happens here in Greece, islands have less vat than mainland.
but all large companies, including telecoms, are based in mainland Greece.
in Greece due to the economic crisis, there is also a additional 12% tax for mobile services, both for voice prepaid or postpaid customers.

data customers using internet only services are excluded.

[NFH]

Originally Posted by fsotirop

the same happens here in Greece, islands have less vat than mainland.
but all large companies, including telecoms, are based in mainland Greece.

I understood that the VAT reduction on some Greek islands applies to goods, but not to services. Also the whole of Greece, except for Mount Athos, is within the EU VAT area.

The difference in Spain is that the Canaries, Ceuta and Melilla are outside the EU VAT area. Normally if a customer based in the mainland EU roams outside the EU VAT area inside the EU (e.g. Gibraltar, French overseas territories, Åland etc), no VAT is charged by the home network as a consequence of a derogation from Article 9(1) of Council Directive 77/388 (OJ No. L145, 13.6.1997, p.1) ("the Sixth VAT Directive") made by Council Decision 6236/97 (OJ No. L86, 28.3.97, p. 33). However, this does not appear to be the case in practice when roaming in the Canaries, for example, because the same networks cover the whole of Spain, making it difficult for the home network to determine whether usage occurred inside or outside the EU VAT area.

[fsotirop]

Originally Posted by NFH

I understood that the VAT reduction on some Greek islands applies to goods, but not to services. Also the whole of Greece, except for Mount Athos, is within the EU VAT area.

The difference in Spain is that the Canaries, Ceuta and Melilla are outside the EU VAT area. Normally if a customer based in the mainland EU roams outside the EU VAT area inside the EU (e.g. Gibraltar, French overseas territories, Åland etc), no VAT is charged by the home network as a consequence of a derogation from Article 9(1) of Council Directive 77/388 (OJ No. L145, 13.6.1997, p.1) ("the Sixth VAT Directive") made by Council Decision 6236/97 (OJ No. L86, 28.3.97, p. 33). However, this does not appear to be the case in practice when roaming in the Canaries, for example, because the same networks cover the whole of Spain, making it difficult for the home network to determine whether usage occurred inside or outside the EU VAT area.

yes you're right the reduced vat in greek islands only applies to goods, not services.
the only exception is the tourist industry like hotels, restaurants etc where they do charge the reduced vat on these services.

[NFH]

Sorry, I forgot to make my main point. Given that the Spanish networks do not seem to differentiate between usage inside and outside the EU VAT area (at least with regard to the billing data they pass to foreign networks for roaming customers), I don't think that the VAT rate is based on location of usage. I think it's more likely to be based on where the customer is based. Another scenario to take into account is if a Melilla-based customer buys a bundle of data or minutes and uses that bundle in mainland Spain, the Canaries and Ceuta. Given that the bundle is bought as a single package, I'm guessing that 4% VAT would be applied to the bundle, regardless of where in Spain it is subsequently used.

Can anyone confirm?

[fsotirop]

"I don't think that the VAT rate is based on location of usage. I think it's more likely to be based on where the customer is based"

correct, that's the point.

[NFH]

Originally Posted by fsotirop

"I don't think that the VAT rate is based on location of usage. I think it's more likely to be based on where the customer is based"

correct, that's the point.

But if it is indeed that simple, why doesn't everyone register that they are based in Melilla so that they pay only 4% VAT, no matter where in Spain they use the SIM card?

[inquisitor]

Afaik Spanish operators charge the VAT based on customers' location in the moment of usage and not based on their residence. At least I was charged only 7% when ordering data packs ("bonos prepagos") while I was staying on Gran Canaria back in 2010 where I purchased a Vodafone SIM which was registered with my German address.