Recargo de equivalencia: you pay more when you buy and you do not settle VAT
It is compulsory, not optional, for a good part of the retail trade. And it changes the cost price of everything in the warehouse.
The special VAT regime for retailers: they pay a surcharge on their purchases and in exchange they neither file self-assessments nor deduct VAT.
Articles 148 to 163 of the VAT Act govern it. It applies compulsorily to retailers who are individuals, or entities under the income allocation system all of whose members are individuals, when they sell goods without processing them and more than 80% of their previous year's sales go to final consumers (article 149).
The rates
Article 161 sets four:
- 5.2% on purchases at the general rate of 21%
- 1.4% on goods at 10%
- 0.5% on goods at 4%
- 1.75% on tobacco
What it means
The supplier passes on the VAT and the surcharge on top, and pays it over themselves. The retailer does not file form 303 for that activity and does not deduct any input VAT, not on the goods, not on the rent and not on the electricity.
An example with numbers
A purchase of €1,000 of goods at 21%:
- VAT: €210 · Surcharge: €52
- Invoice total: €1,262
The real cost of those goods in the warehouse is €1,262, not €1,000: 26.2% more, because neither the VAT nor the surcharge is ever recovered. If those goods sell for €1,500, someone working from €1,000 thinks they are making €500 and is actually making €238. Less than half.
The mistake that comes up most
Not telling your supplier you are on the recargo. The law requires the retailer to report it, and if the supplier invoices without the surcharge it has to be corrected. When it turns up six months later, that is dozens of invoices.
Where this carries on in Cairos: The recargo, with its accounting.
Terms that go with this one
Almost no tax concept makes sense on its own. These three are the ones that most often turn up beside it.
Input VAT
The VAT you pay your suppliers on purchases and expenses, deductible only if the goods or the service are used in your activity and you have the full invoice.
VATFiling period
The interval each self-assessment is worked out and filed for: quarterly as a general rule, monthly in a defined set of cases.
InvoicingTaxable base
The total consideration for a transaction before VAT is applied to it: what you really charge for your work or your goods.
This, handled without thinking about it
Cairos keeps the invoices, the record books and Hacienda's forms from the same data, so the theory on this page turns into boxes that are already filled in.
No card and no minimum term.