In 2026, Spain came under the spotlight of the European Union for refusing to implement VAT exemptions for small businesses. This decision directly impacts thousands of entrepreneurs, who lose substantial amounts each year due to the absence of this tax relief. While other EU countries have already adopted the relevant directive, Spanish authorities continue to collect additional taxes, prompting discontent among owners of small companies and freelancers.
According to russpain.com estimates, by not complying with European standards, small business owners in Spain pay about 200 million euros more each year than they otherwise would. This figure results from the country’s failure to introduce the ‘IVA franquiciado’ scheme—a regime allowing companies with turnover under 85,000 euros to avoid paying value-added tax. As a result, Spain has become the only EU country where this measure is still not in effect, despite a direct mandate from the European Commission.
Pressure from Brussels
In March 2026, the European Commission officially filed a complaint against Spain with the EU Court of Justice (TJUE), demanding a fine of up to 30 million euros and a daily penalty of up to 100,000 euros for each day of delay. The move was triggered by Spain’s delay in implementing Directive 2020/285, which was intended to ease the tax burden on small businesses and simplify operations within the single European market. According to the European Commission, Spain not only failed to meet its obligations, but also officially notified Brussels of its unwillingness to apply the exemption for small entrepreneurs.
This move sparked a sharp reaction from European institutions, as the absence of the directive restricts the freedom of movement and business activity for Spanish citizens in other EU countries. For example, an entrepreneur from Spain working in France or Italy cannot benefit from a tax exemption if their country has not adopted the corresponding law. This creates unequal conditions and undermines the principles of the single market.
Political consequences
Within the country, the situation has taken on a political dimension. Vice Prime Minister María Jesús Montero, who is running in the Andalusia elections, has come under pressure for refusing to support small businesses. Andalusia is a region with one of the highest numbers of self-employed individuals, and the government’s decision not to implement the IVA exemption could influence voter sentiment.
The opposition, particularly Partido Popular, is actively leveraging this issue in its campaign, promising to immediately introduce a ‘zero IVA’ for small businesses if they come to power. Given that the economic situation remains tense and entrepreneurs are facing increased tax burdens, this point has become one of the key topics in the election debates.
Financial risks for the country
In addition to political consequences, Spain faces the risk of significant financial penalties. If the EU Court upholds the European Commission’s demands, the country will be required to pay not only a lump-sum fine but also daily payments until the directive is fully implemented. There have already been cases in EU history where countries have paid tens of millions of euros for similar violations, as happened with Germany over another directive.
The issue of implementing European regulations is becoming increasingly pressing amid other conflicts between the Spanish government and European institutions. Recently, Spain’s Council of Ministers also faced delays in adopting anti-crisis measures due to disagreements between Sumar and PSOE, which was discussed in detail in the report on disputes over new support measures for renters.
Context and similar cases
In recent years, the European Union has tightened control over the enforcement of directives related to taxes and the protection of entrepreneurs’ rights. In 2021, Spain was already fined €15 million and required to pay €89,000 daily for delays in implementing the data protection directive. Similar measures have been applied to other countries, including Germany, where the penalty for violating the whistleblower protection directive amounted to €34 million. These cases demonstrate that the European Commission does not limit itself to warnings and is prepared to enforce its decisions through the courts and financial pressure.
