{"id":19304,"date":"2024-01-06T21:35:37","date_gmt":"2024-01-06T21:35:37","guid":{"rendered":"https:\/\/www.asesoriaorihuelacosta.com\/?p=19304"},"modified":"2024-01-09T17:56:27","modified_gmt":"2024-01-09T17:56:27","slug":"is-input-vat-deductible-before-starting-the-activity","status":"publish","type":"post","link":"https:\/\/www.asesoriaorihuelacosta.com\/en\/is-input-vat-deductible-before-starting-the-activity\/","title":{"rendered":"Is input vat deductible before starting the activity?"},"content":{"rendered":"\t\t
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What if I pay vat before starting the activity?<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\r\n\t\t\t\t<\/div>\r\n\t\t\t\t\t<\/div>\r\n\t\t\t\t<\/section>\r\n\t\t\t\t
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If you are starting a business, it is common for you to incur expenses and make investments before you start earning income from it. Can you deduct the input VAT on these transactions?<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\r\n\t\t\t\t<\/div>\r\n\t\t\t\t\t<\/div>\r\n\t\t\t\t<\/section>\r\n\t\t\t\t

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Preparatory phase<\/h3>

When an entrepreneur is about to start his business, it is usual that, before any sales have been made, he incurs expenses and investments for which VAT is borne.<\/p>

VAT incurred during this “preparatory phase” is deductible provided that it can be shown that by incurring these expenses it was intended to start an activity which, in turn, gives the right to deduct the input VAT.<\/p>

Intentionality<\/h4>

The following evidence, among others, may be provided for this purpose:<\/p>

  • Formalities. That the necessary authorisations and licences have been applied for to carry out the activity.<\/li>
  • Goods and services. That, due to their nature, the goods and services acquired were related to the activity to be carried out.<\/li>
  • Census declaration. That prior to incurring the expenses, a census declaration “prior to the commencement of operations” had been filed with the Tax Authorities.<\/li>
  • Reasonable time. And, finally, that the time elapsed between the acquisition of the goods and services and the start of the activity was reasonable (depending on the type of activity).
    Census declaration<\/li><\/ul>

    In these cases, when filing the census return (form 036), box 504 must be ticked (Notification of commencement of activity . Delivery of goods or provision of services subsequent to the acquisition of goods or services) and indicate in box 505 the date on which these preparatory acts begin.<\/p>

    Subsequently, when the supply of goods or services begins, another census return must be filed and boxes 508 and 509 must be ticked, indicating the date on which these supplies and services begin.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\r\n\t\t\t\t<\/div>\r\n\t\t\t\t\t<\/div>\r\n\t\t\t\t<\/section>\r\n\t\t\t\t

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    Even if the activity does not start<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\r\n\t\t\t\t<\/div>\r\n\t\t\t\t\t<\/div>\r\n\t\t\t\t<\/section>\r\n\t\t\t\t
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    What about the input VAT refund?<\/h3>

    In these cases, it is even possible to claim the input VAT refund before the start of sales.<\/p>

    For example, if a businessman starts the preparatory phase of his activity at the end of year N, but does not make any sales until March of year N+1, in the last VAT return of year N (which is filed in January of N+1) he can claim the input VAT refund throughout year N.<\/p>

    No start of activity<\/h3>

    What happens if the entrepreneur who obtains the input VAT refund does not start the activity, and can the tax authorities demand a refund of the refund?<\/p>

    Even in this case, in many cases it is not necessary to refund the input VAT:<\/p>

    • Whether input VAT is deductible depends on the circumstances at the time it was incurred.<\/li>
    • Thus, if it can be shown that the intention was to start an activity and this was not possible due to objective facts (i.e. not due to the mere will of the entrepreneur), that VAT will be deductible, even if the activity is never started.<\/li><\/ul>

      Beware of assets<\/h4>

      This applies in case of expenses incurred or other investments that have been lost (e.g. a purchase option on a plot of land that is not exercised in the end).<\/p>

      However, in the case of assets that remain in the entrepreneur’s assets after the cessation, this changes: unless the assets are used for a new activity with the right to deduct, the entrepreneur must pay the applicable VAT on them as if he were acquiring them (it will be a case of self-consumption of goods).<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\r\n\t\t\t\t<\/div>\r\n\t\t\t\t\t<\/div>\r\n\t\t\t\t<\/section>\r\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"

      What if I pay vat before starting the activity? If you are starting a business, it is common for you to incur expenses and make investments before you start earning income from it. Can you deduct the input VAT on these transactions? Preparatory phase When an entrepreneur is about to start his business, it is […]<\/p>\n","protected":false},"author":2,"featured_media":19165,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_eb_attr":"","inline_featured_image":false,"footnotes":""},"categories":[1,46],"tags":[],"class_list":["post-19304","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog"],"featured_image_src":{"landsacpe":["https:\/\/www.asesoriaorihuelacosta.com\/wp-content\/uploads\/2024\/01\/iva-soportado-1140x445.jpeg",1140,445,true],"list":["https:\/\/www.asesoriaorihuelacosta.com\/wp-content\/uploads\/2024\/01\/iva-soportado-463x348.jpeg",463,348,true],"medium":["https:\/\/www.asesoriaorihuelacosta.com\/wp-content\/uploads\/2024\/01\/iva-soportado-300x169.jpeg",300,169,true],"full":["https:\/\/www.asesoriaorihuelacosta.com\/wp-content\/uploads\/2024\/01\/iva-soportado.jpeg",1280,720,false]},"yoast_head":"\nIs input vat deductible before starting the activity? - Asesor\u00eda Orihuela Costa<\/title>\n<meta name=\"description\" content=\"It is often necessary to incur expenses before starting our business activity. 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