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VAT Guide for Artists: Applying 10% VAT to Invoices
Law and Tax Changes
“10% VAT? I thought we pay only 21% VAT in Spain…”
Navigating the intricacies of VAT rates can be a daunting task, especially for artists, interpreters, directors, and technicians in Spain. Since January 1, 2019, a significant change has allowed these individual service providers to apply a reduced 10% VAT rate on their invoices, provided certain conditions are met.
In this comprehensive guide, we unravel the essential details, shedding light on the criteria, recipients, and types of services that qualify for this advantageous VAT rate.
Content
Applying 10% VAT to invoices
From January 1, 2019, individuals who provide services such as interpreters, artists, directors and technicians, may apply the reduced tax rate of 10% on VAT on their invoices when they are addressed to:
1. Producers of cinematographic films that can be shown in theatres.
2. Organizers of plays and musicals.
According to the doctrine of the General Directorate of Taxes, we clarify below the different aspects of the commercial relationship (provider, recipient and service) to determine whether or not, in each case, the requirements for the application of the 10% rate.
Service provider criteria
The service provider should meet these two requirements:
1. It must be an individual. Mercantile societies and communities of goods that provide this type of services will be taxed at 21%.
2. The 10% rate will apply regardless of whether the interpreter, artist, director or technician:
– hire through a representative acting on behalf of others, since it is understood that it is the artist himself who provides for himself the corresponding artistic service.
– hire the services of other artists under a labour dependency regime to provide the service.
Recipient of the service: focus on organizers
Within the recipients, those that generates more doubts are the organizers of a play or musical, and we will focus on them.
The person or entity that carries out the organization of the material and human resources or of one of them with the purpose that the theatre or musical work is represented (contracting the premises, advertising, ticket sales, etc.) is considered the organizer of theatrical or musical work.
Can have the status of organizers of plays or musicals the following:
1. Public entities (State, Autonomous Communities, Diputación, Town Halls);
2. Associations of diverse nature (cultural, neighbours, parents of students);
3. Public or private schools;
4. Trade unions, company committees or political parties;
5. Companies usually dedicated to the organization of such works (theatre entrepreneurs, owners of “pubs” or party halls);
6. Artistic agents, representatives and promoters, when they assume the organization of the works not limiting themselves to the mediation activity;
7. Companies that have another corporate purpose but occasionally organize the representation of theatrical or musical works, whatever the purpose of this activity (Savings Banks, commercial or industrial companies).
The services provided by the interpreters, artists, directors or technicians, individuals, will be taxed at 21% to entities that do not assume the organization of the work or are limited to mediation work.
Type of provided service: plays and musicals
The type of service provided to organizers of plays and musicals is the one that generates more doubts.
First, it is important to determine what is considered ‘plays’ and what ‘musical works’:
– Theatrical works: they are the dramatic, dramatic-musical, choreographic, pantomimic and literary works as soon as they are the object of recitation or adaptation for the scene.
– Musical works: they are those that are expressed through a combination of sounds to which a literary text can be attached or not.
There are certain aspects within the organization of the event that have no significance in the application of the reduced rate of 10%:
– The place where the performance takes place is indifferent (parks, squares, schools, party halls, cultural houses, pubs, theatres or other venues).
– Nor does it affect the procedure by which the amount of the consideration is determined (fixed cachet or percentages in box office collection).
– The purpose pursued by the organizer does not influence the application of the reduced rate (organization of popular parties or other recreational events free of charge to the spectators, organization of the activity for profit).
Specific scenarios to apply 10% VAT
Finally, we list certain specific shows and their type of VAT taxation:
– 10% VAT is paid for the artistic services of Guiñol, the puppet theatre, storytelling and the services consisting of reciting poetry during a flamenco concert.
– 21% VAT is paid for the activity of magic for not being considered a play.
Last ideas…
Understanding the nuances of applying the reduced 10% VAT rate to invoices is crucial for artists, interpreters, directors, and technicians in Spain. By aligning their services with the outlined criteria, they can ensure proper VAT classification and enhance financial management within their artistic ventures.
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