Equivalence surcharge (recargo de equivalencia)

What it is

The equivalence surcharge simplifies VAT for small retailers. Instead of running its own cycle of output and input VAT, the retailer has the tax on its sales collected in advance: its suppliers charge it an additional surcharge alongside the VAT on the purchase. That payment settles the tax due on the retailer’s resale to the public.

How it works

The regime applies to retailers who are individuals, or income-attribution entities for personal income tax, in the sectors and under the conditions set by regulation (article 148). Article 149 defines a retailer: someone who habitually supplies movable goods without subjecting them to manufacturing, processing or production, and who in the previous year made more than 80% of those supplies to non-businesses or to social security bodies, with exceptions. A commercial company cannot use the regime.

The surcharge rates, on the same base as VAT, are set by article 161: 5.2% in general; 1.4% on goods that bear the 10% reduced VAT rate; 0.5% on goods at the 4% rate; and 1.75% on tobacco products.

A retailer under the surcharge need not account for or pay VAT on its sales within the regime (article 154, paragraph two), and in exchange it cannot deduct the VAT on those purchases. It remains liable to self-assess VAT on intra-EU acquisitions.

Who must prove it

People and entities that are not commercial companies and habitually sell at retail must prove to their suppliers whether or not they are under the regime (article 163). If a supplier does not know where the customer stands, it may charge the wrong amount.

Common mistakes

• Charging the surcharge to a customer who is not in the regime, or failing to charge it to one who is.
• Using the wrong surcharge rate: it depends on the VAT rate of the goods.
• A retailer filing modelo 303 for sales the regime already covers.
• Treating the regime as applicable to an activity that is not resale without transformation.
• Missing the specific rules on entering or leaving the regime, such as the inventory adjustment.

How Frihet handles it

Frihet’s product manifest does not currently record specific support for the equivalence surcharge. If you sell to retailers who apply it, or are one yourself, check with us what the tool covers before invoicing with it, and have your advisor review each invoice.