What is quarterly VAT and who pays it?
Quarterly VAT is one of the main tax concerns of the self-employed. It is very important that the corresponding VAT is paid in each period, otherwise the Tax Agency will impose penalties.
In the following, we will analyse what quarterly VAT is, who is obliged to pay it and how it is settled.
What is quarterly VAT
Quarterly VAT is a value added tax that companies, the self-employed and professionals in Spain (and in many other countries, although under different names and regimes) are obliged to declare and settle with the Tax Agency on a quarterly basis.
This declaration reflects the difference between the VAT collected (the VAT charged to customers on sales or supplies of services) and the input VAT (the VAT paid by the company on its purchases or acquisitions of goods and services). If the VAT collected is higher than the input VAT, the taxpayer must pay the difference to the tax authorities. If the opposite is the case, it can be offset in future returns or, in certain cases, a refund can be claimed.
Quarterly VAT filing allows the administration to maintain more immediate control over transactions and taxpayers to better manage their tax obligations in the short term.
Who has to pay quarterly VAT
In Spain, quarterly VAT is paid and filed with the Tax Agency mainly by two groups:
Self-employed persons: Persons who carry out an economic activity on their own account, whether as sole proprietors or professionals, are obliged to submit and, where applicable, settle VAT on a quarterly basis. This includes professionals with different activities, irrespective of their legal form.
Companies: Business entities (such as limited companies, limited partnerships, etc.) that carry out economic activities subject to VAT are also obliged to file this return on a quarterly basis. Depending on their volume of operations, some large companies may be subject to monthly returns, but most make quarterly returns.
Both groups must self-assess VAT, which involves calculating the difference between VAT collected (on sales or services provided) and input VAT (on purchases or services received).
It is essential that both self-employed and businesses keep detailed accounts of all their transactions in order to accurately determine the amount to be paid or offset when making the quarterly VAT return.
How quarterly VAT is paid
The quarterly VAT payment process in Spain involves a series of steps and the use of online tools provided by the State Tax Administration Agency (AEAT). Here are the details of how this process is carried out:
Registration and access
To make the VAT return and payment, you must be registered in the AEAT system and have a digital certificate, electronic ID card or PIN system for secure access.
Filling in Form 303
This is the official form for self-assessment of VAT. You must detail the VAT collected (accrued VAT) and the input VAT (deductible VAT) in that period. The resulting difference will be the amount to be paid or offset.
Using the E-Office
Once inside the AEAT e-Office, the taxpayer must search for form 303 and complete it. The system will guide the taxpayer through the different sections, where the relevant data will be entered.
Filing the return
Once the form has been completed, the tax return is filed online. If the result is a refund, it can be offset in future tax returns or, in certain cases, a refund can be requested.
Payment of VAT
If the tax return results in a refund, there are several options:
- Direct payment: Using the direct payment option in the E-Office. It is possible to pay through a collaborating entity (banks, savings banks and cooperatives) that allows online operations.
- Direct debit: You can pay by direct debit so that your bank account is automatically debited on the due date. It is important to bear in mind that if you opt for this method, there is a specific deadline for filing the tax return so that the payment can be paid by direct debit.
- Over-the-counter payment: If you prefer the traditional method, after filing the tax return online, you can print the receipt and go to a collaborating entity to make the payment over the counter.
- Digital certificate, it is also possible to pay with the digital certificate of the company or self-employed person.
Receipt
After making the payment, it is crucial to keep the receipt. This document will be proof that the tax obligation has been fulfilled correctly.
It is vital to comply with the deadlines established for the submission and payment of quarterly VAT to avoid penalties or surcharges. In general, the deadlines are as follows: first quarter (1-20 April), second quarter (1-20 July), third quarter (1-20 October) and fourth quarter (1-30 January of the following year).
Advice on quarterly VAT payments
Tax advisors specialise in tax regulations and can help companies and self-employed individuals to comply correctly with their tax obligations, minimise errors and take advantage of possible benefits or deductions. In addition, outsourcing this process allows the business owner or professional to focus on their core business, ensuring that the VAT settlement is carried out in a timely and appropriate manner.
At Asesoría Orihuela Costa we work with you to help you settle your company’s quarterly VAT within the stipulated period, taking advantage of the tax deductions that affect your business.
