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Locals often tip even if modestly, it is considered polite and the Spanish are sticklers for manners and etiquette. Leaving the small change behind to round up to the nearest Euro is the most common. Maybe an extra Euro or 2 if the service was very good and added value.
In restaurants then upscale tipping can be expected. The usual is 10%.
There are no added service charges on the final bill at most restaurants or bars, although some higher priced restaurants may add IVA (Value added tax, currently 18% going up to 20% on the 1st September 2012) to the final bill. This should be clearly seen in the menu.
Don’t forget these service staff work hard for little money and any extra is always appreciated.( most of the patrons are also lower income tourists, which everyone seems to forget)
Outside the restaurant business, some service providers, such as taxicab drivers, hairdressers and hotel personnel may expect tipping in an upscale setting.
2013. The VAT has been increased and is now also added on the Canary Islands, but not at the same rate as on the Mainland.