How can I claim a VAT refund in Spain?
The VAT refund is a very important issue for businesses and the self-employed.
In extreme cases it can mean the viability of a business.
For a tax consultancy such as Asesoria Orihuela Costa it is our daily bread and we are used to requesting hundreds of VAT refunds from the AEAT.
I always say that you should not abuse and ask for money from the tax authorities if it is not justified. VAT is both a simple and complex tax.
If you charge VAT, you can deduct VAT. If you do not charge VAT, you cannot deduct VAT;
In this article, we will explain how to apply for a VAT refund.
What is VAT?
OK, yes, for a lot of people this is an obvious question but as the article is not made with artificial intelligence I prefer to make it clear from the beginning.
You have to bear in mind that VAT is a European tax and in many countries VAT does not exist.
VAT is the Value Added Tax.
VAT is a tax for the final consumer, the customer who does not carry out an activity and cannot deduct VAT.
We say final customer because VAT is paid and deducted at all commercial stages of sale or supply of services, until it reaches the last customer for whom VAT cannot be deducted.
And I wonder why VAT is not eliminated for intermediaries and only paid by the end customer?
We would be out of work.
In principle all businesses and self-employed persons can deduct VAT if it is related to their activity, unless they carry out an activity that is exempt from VAT such as doctors, teachers, health activities, etc. who, as they do not charge VAT, cannot deduct VAT.
Who can apply for a VAT refund?
In the exercise of their activity, any company or self-employed person who is subject to VAT can apply for a VAT refund;
However, there are sometimes complex mechanisms to follow for people starting a business.
What does it mean to be subject to VAT?
Activity subject to VAT
An activity subject to VAT means that the law considers that VAT must be charged on that activity and as a businessman, you are the taxable person and you must invoice with VAT and pay it to the tax authorities;
Activity not subject to VAT
It is an activity which, according to the law, VAT is not chargeable due to the very nature of the transaction itself. In other words, the transaction is not a taxable event for VAT.For example, the rental of flats to individuals is not subject to VAT.
Remember, a taxable person is the self-employed, company or entity obliged to pay VAT in the treasury
What requirements must be met for an invoice to be deductible?
Watch out, because this question has a trap.
The Treasury is very strict with the rules and criteria of VAT deductibility.
And through a requirement or a tax inspection you can say that the VAT you have requested in the VAT refund is not deductible.
In general, for VAT paid in the exercise of your activity to be deductible, you must meet 5 requirements:
- Be registered/registered in finance
The high registration in the treasury is done using the 036 model
- To have a bill
An invoice is an accounting document that has to meet certain requirements. In this article we tell you what formal requirements an invoice must have.
- The invoice is in the accounting
- That it is exclusive to the activity
- That is necessary to obtain the income from the activity.
How is VAT declared?
There are two ways to declare VAT:
- Every three months
Quarterly VAT return
To register an activity, you must communicate it to the treasury through form zero 036.
By registering your activity in the treasury, you automatically have some obligations. In the case of VAT and unless your activity is exempt from VAT, you have the obligation to file VAT quarterly.
The invoices issued and received are counted daily (tose that we are charging and those that we are paying).
Quarterly we declare whether the VAT balance is positive or negative. If it is positive, we pay it to the hacienda and if it is negative we compensate it with the following quarter.
When is the quarterly VAT declared?
Deadlines for the quarterly VAT return
- April 20
- July 20
- October 20
- January 30 (of the following year)
How is quarterly VAT declared?
We have to present the 303 form online through the treasury website at this link.
You will have to have a digital certificate or a mobile key.
Asesoria Orihuela Costa is a social partner of the tax agency and can submit quarterly VAT returns for third parties.
Logically, we have our own digital certificate.
- Monthly
Monthly VAT return
The invoices received and issued are put into the accounting and are declared monthly.
To be in the monthly refund system, you must expressly request it from the treasury and it has to evaluate if your company really needs to make monthly declarations.
ATTENTION this is a complex system, because to be in the ReDeMe (monthly refund system) you have to be in the SII (immediate information system) which is a system in which you have to provide / declare to the treasury the book records of invoices every four days.
What is a Register book?
It is simply a list of invoices with the data that the Treasury asks us for.
In the monthly evolution system there are usually companies that pay a lot of VAT, but do not charge, for example, companies that sell in Europe that sell in Europe and import from abroad.
At Asesoria Orihuela Costa, we are experts in REDEME and SII.
Do not hesitate to contact us if you want to register for the monthly VAT refund systems.
When is the VAT refund requested?
Request for quarterly VAT refund
As we have explained before, in the quarterly VAT, quarterly declarations are made and presented and only and exclusively the refund is requested in the fourth quarter (January 30)
If, for example, in the first quarter you get a negative legal result, you do not request a refund of VAT, but you will compensate it with the following quarter. And thus get to the fourth trimester.
If the fourth quarter is also negative, you have two options, tar the refund or compensate it with the following year’s quarter.
Very important: from the day after the end of the deadline for the VAT filing, the tax agency has up to six months to pay you back.
Request for monthly VAT refund
Once you are registered in the ReDeMe and in the SII you will have to submit monthly declarations and although in the first months it takes a little longer between three and four months to return when it stabilises the thing usually returns to the month.
It’s a little logical, the hacienda receives its invoices every four days, it has information almost in real time and that’s why it analyses and returns faster
Tricks to request a VAT refund
Actually, there are no tricks to request a VAT refund, but there is a way to do things correctly
For the Treasury to return the VAT, these are some key aspects:
- Excel file
When the Treasury asks for information to check if you are entitled to a VAT refund, the first thing you ask for are Excel files.
That Excel file has to come with all the information and data you want to finance.
Modern accounting programs incorporate them directly into you.
But of course, you have to have and put the information in the accounting program.
It is not reflected in the Excel to inform all these details.
- Perfect invoice
The invoice that they give you, you have to carry all the information that an invoice requires and the more specific the concept is the better.
- Financial support of the invoice
An invoice, after all, is just a document and anyone can make a false invoice. How many times have we heard that an entrepreneur has been sentenced for documentary forgery?
The invoice has to be joined with a payment by bank transfer, direct debit and lately they already accept the Bizum as proof of payment.
- Never request VAT that is not exclusive and necessary to obtain the income from the activity.
The Treasury puts a lot of emphasis on this and logically here comes the interpretation of each one for the customers. That expense is necessary and exclusive to the activity, such as a car trip to visit the client.
But for finance it is not deductible, because as you show that in that visit to that client it has been to do something that enters the personal sphere.
This is how complicated VAT is
Don't forget to apply for VAT paid in Europe
VAT in the EU
As you know, the VAT incurred for goods or services acquired abroad cannot be deducted in the periodic VAT returns submitted in Spain.
To recover the tax, if the VAT has been incurred in another EU country, its refund must be requested using the 360 form (along with a copy of the invoices justifying the amounted VAT), from the end of the quarter or year for which the refund is requested until September 30 of the following year.
Non-deductible expense
Well, don’t forget to submit your refund request on time.
If you do not, in addition to losing the right to refund, the Treasury will not allow you to consider said VAT as a deductible expense in the Corporate Tax (IS).
The Treasury considers that in this case a liberality occurs and, therefore, the expense is not deductible.
This is debateable
In any case, if your company can prove that it has done everything possible to recover the VAT and has not succeeded (for example, because the supplier has not sent the invoices or due to other situations of force majeure), do not conform to this criterion and defend the deduction in your IS of the VAT not recovered.
Summarising
As we have commented, asking the treasury for money is a delicate task.
Over the years we have gained experience to know who returns the hacienda and who inspects.
Hacienda is a monster, they have a lot of very good and motivated people working who know very well what to do so if Hacienda starts to investigate it will get something for sure.
If you follow our advice, they will almost certainly refund your VAT.
Our experience says that with hacienda you have to be sincere and always tell the truth. In the end it will be benefitted
