What is the monthly VAT returns scheme (Redeme)?

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Being registered in the monthly vat returns (Registro Devolución Mensual in Spain) is a very interesting option for companies that pay a lot of VAT in advance and have to wait up to 18 months to collect the VAT they have paid in the traditional way.

REDEME = monthly vat returns scheme

Very important in spanish monthly vat returns scheme (the Redeme)

Those who are registered in the Redeme are obliged to be registered in the Immediate Information System, the famous and dreaded SII. In other words, they will have to file returns every 4 days.

Monthly VAT refund register

Monthly VAT returns

Redeme stands for monthly VAT returns register.

Remember that you must apply for inclusion in the Redeme in November by submitting a census declaration (form 036).

Thus, from 2024 onwards, you will be able to apply for the VAT return in your favour on a monthly basis, without having to wait for the last return of the year.

Very important in the monthly vat returns (Redeme)

As soon as you submit the application form 036, the tax office will start a census check in which they will ask you for a lot of information depending on your activity, such as:

Register of invoices.
Register of intra-Community invoices.
Proof that you have borne the cost of transporting the goods sold in Europe.
Contracts for the provision of services.
Where the activity is located
Visit to the company to verify the effective exercise of the activity.
The reason for the application for registration in the Redeme.

Submission of registration books via the Internet

If you opt for the REDEME, you will have to declare VAT every month and submit the registration books online via the SII system (if you invoice more than 6,010,121.04 euros per year you are already obliged to do so, so opting for the REDEME does not entail any additional obligations).

This system may be convenient for your company if you make many sales without VAT abroad or if you charge a lower VAT rate than the one you pay, so that your VAT returns are usually refundable.

Also if you are going to make a major investment at the beginning of 2024, thus incurring a lot of VAT, and you do not want to wait until the end of the year to claim a refund.

In November, your company can apply for the monthly VAT returns scheme (REDEME) for 2024.

How does monthly vat returns works?

During the month of November, companies can apply for the monthly VAT returns scheme (REDEME) for the following year…

In November, registration in the REDEME is requested

During the month of November, companies can apply for the monthly VAT returns scheme (REDEME) by submitting a census declaration (form 036).

Thus, from the following year onwards, they will be able to request the refund of the tax in their favour on a monthly basis, without having to wait for the last tax return of the year, with the financial savings that this entails.

Monthly vat returns scheme requirements

To be eligible for the REDEME, the company must be up to date with its tax obligations. In addition, and among other requirements :

The company must not be in any of the situations for revocation of the NIF, for example, for not presenting the Corporate Tax for three consecutive financial years.
It must not be in any of the situations that give rise to the precautionary cancellation of the REDEME (for example, for not carrying out economic activities).

Internet books. Many companies do not opt for the monthly vat returns because this system obliges them to declare VAT every month and to file their registry books via the Internet (through the SII system).

However, companies with a turnover of more than 6,010,121.04 euros are already obliged to do so, so opting for monthly vat returns scheme does not entail any additional obligations, but only advantages.

The REDEME allows VAT refunds to be requested each month. By not having to wait for the last return of the year to do so, it allows financial savings to be made.

Is it possible to apply for monthly vat returns scheme in the middle of the year?

Monthly VAT returns scheme

If you foresee that this year your company is going to increase its sales abroad or you are going to make important investments whose VAT will take a long time to recover, consider using the Monthly Refund System (REDEME).

You will then be able to apply for a monthly VAT refund, so you won’t have to wait until the end of the year.

How to apply for monthly vat returns REDEME?

In order to apply for the REDEME this year, you should have applied for it last November. However, you can also opt for this scheme during the year, during the deadlines for submitting VAT returns.

In this case, registration in the monthly vat returns will take effect from the day following the end of the period to which the tax return relates. For example:

If your company, which until now filed quarterly returns, submits the application on 15 April (within the deadline for the first quarter’s return), your registration in the monthly vat returns will take effect in respect of the monthly return for April.

On the other hand, if you submit your application on 25 May, the tax authorities will reject it and file it as not having been submitted within any “application window” (i.e. within one of the VAT assessment periods).

If you wish to register your company in the monthly vat returns and you did not do so in November, you can also do so during the year.

Advantages and disadvantages of monthly vat returns

Financial savings with the monthly vat returns scheme

The main advantage of the monthly vat returns is financial, as it allows VAT refunds to be advanced. In this respect, the companies that stand to benefit most are the following:

Companies with sales abroad (whether exports or intra-Community supplies), whose deductible VAT is usually higher than the VAT charged.
Those that charge a lower VAT rate than the one they bear, and whose returns are also usually refundable (hotel and catering companies, etc.) .
Those who carry out masonry, electrical, plumbing, etc. work on buildings that are being built or rehabilitated, and carry a large amount of input VAT in their favour. Remember that, in these cases, it is the recipient of the work who pays the tax himself, so the contractor does not have to pass it on [LIVA, art. 84.Uno.2º.f].
Companies that at a given moment make a significant investment and the VAT charged during the year is not sufficient to offset the VAT borne on that investment.

It is true that in the latter case (major investment) the company can apply for a refund of the VAT in its favour in the last return of the year.

However, it may take several months from the time the return is filed until the tax authorities refund the tax.

It is most likely that a large part of the VAT will not be recovered until 12 to 18 months after the date of the investment.

On the other hand, if the company has opted for the monthly refund scheme, the VAT will be recovered much sooner.

In fact, it will be able to claim the refund in the tax return of the same month in which the investment is made (not having to wait until the end of the year), thus making significant financial savings.

Example of the monthly vat returns scheme

A company has a monthly differential between output VAT and input VAT of 2,000 euros (payable).

However, in January 2016 it plans to acquire new premises for its activity for which it will pay VAT of €84,000.

Well, if by registering the company in the monthly vat returns you get the VAT refunded in your favour after one month and by not doing so you get it refunded in July 2017, opting for this regime will allow you to obtain a financial saving of 5,650 euros (considering an interest rate of 7%).

Disadvantages of monthly vat returns

In any case, before opting for the REDEME, it is necessary to analyse whether the financial savings expected to be obtained compensate for the greater administrative burden derived from its application. Remember in this regard:

Companies under this system are obliged to file their VAT returns electronically and on a monthly basis.
The option for the monthly vat returns also obliges them to file their VAT registers online and every 4 days through the SII.
Being registered in the monthly vat returns is not so easy because the tax authorities will ask you for a lot of information to check that your company can really be registered in the monthly vat returns.

Therefore, companies that register under this regime because they make a one-off investment, it is in their interest to be registered only for the year of the investment and to deregister for the following year, so that the greater administrative burden is only temporary.