Recargo de equivalencia, explained
It is compulsory for almost every retailer who is an individual, it is not a choice, and it completely changes how each purchase is entered. Treating it as deductible VAT inflates the margins of the whole shop.
The four things to understand
It is a regime that is short to explain and long to put right when it has been handled badly for years.
It is not optional
If you are an individual or an entity under the income allocation system, you do not process the product and more than 80% of last year's sales were to final consumers, it is compulsory. You neither choose it nor opt out of it.
Your supplier charges it
On their invoice they charge you the VAT and the surcharge on top. You do not file a 303 for that activity: with that surcharge you have already settled up.
It is cost, not deductible VAT
You deduct nothing of the VAT on your purchases. The real cost of the item is the taxable base plus the VAT plus the surcharge, and that is what you have to work your margin out on.
And it changes your obligations
No 303 and no VAT books for that activity, but you still have the 130, the 111 if you have staff and the 115 for the rent. And a 309 when you buy in the EU or receive an invoice under the reverse charge.
Screenshot of the ERP: The four things to understand
How much surcharge each thing carries
The surcharge always goes attached to the VAT rate of the goods you buy, and the supplier applies it on their invoice. There are these four and no more: they are set by article 161 of the VAT Act.
| VAT on the goods | Surcharge | Sample product |
|---|---|---|
| 21 % | 5,2 % | Clothing, footwear, electronics, cosmetics, hardware, toys and soft drinks with added sugars or sweeteners. |
| 10 % | 1,4 % | General foodstuffs, bottled water, flowers and plants. |
| 4 % | 0,5 % | Ordinary bread, milk, cheese, eggs, fruit, vegetables, olive oil, books and newspapers. |
| Tobacco products | 1,75 % | It has its own rate, different from all the others. |
An example with numbers: you buy goods for €1,000 at 21%. The supplier's invoice will be 1,000 + 210 of VAT + 52 of surcharge = €1,262. That, and not the €1,000, is your real cost: 26.2% more than the taxable base says. If you work your margin out on 1,000, the number you set your prices from does not exist. And if you have read somewhere about a surcharge of 1% or 0.62%, those were transitional rates from the 2023 and 2024 VAT cuts on food: they expired on 31 December 2024.
Who is on it and who is not
On it: individuals and entities under the income allocation system — comunidades de bienes and sociedades civiles — whose members are all individuals, provided they are retailers. And «comerciante minorista», retailer, has a legal definition, in article 149 of the VAT Act: habitually selling movable goods without putting them through any process of manufacture, processing or fabrication, and having sales to final consumers in the previous year of more than 80% of the total.
Not on it: commercial companies, anyone who processes or manufactures what they sell, anyone who does not reach that 80%, and anyone supplying services instead of selling goods. A plumber is not on the recargo even if they sell some materials, and an S.L. is not on it even if it has a shop.
And there are fifteen families of products excluded by their nature in article 59 of the VAT Regulations, however they are sold: motor vehicles and their parts, boats and aircraft, jewellery and objects of gold or platinum, luxury fur garments, works of art, antiques and collectors' items, second-hand goods, poultry and beekeeping equipment, petroleum products subject to excise duty, industrial machinery, construction materials, minerals other than coal, unworked metals and investment gold.
How you come off the recargo
You do not come off it by choice: you come off it when you stop meeting the requirements. The three usual routes are incorporating a company, starting to process the product, or the previous year's sales to final consumers falling below 80% of the total.
Any of the three is a census change reported on form 036, and it brings with it starting to file the 303 and to keep the VAT books. It also requires an adjustment for the stock still in the warehouse, because its input VAT was never deducted.
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Frequently asked questions
So that your margins tell the truth
With the real cost of every item, VAT and surcharge included. It is the difference between knowing what you make and thinking you know.
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