Spain: If you're an importer, your VAT financial cost could be reduced
Arantxa de Luis
As is common knowledge, article 211 of Council Directive 2006/112/EC of November 28 2006 (VAT Directive) leaves it to the member states to lay down rules for payment in respect of the importation of goods and provides the option to establish that VAT on import need not be paid at the time of the import but rather in the periodic tax return. This election permits avoiding the financial effect derived for taxable persons from having to pay the import VAT and then recover it through deduction in the periodic VAT returns.
To date, the Spanish legislature had not made use of the option provided in the VAT Directive and, thus, the import of goods in Spain had an adverse financial effect which, at times, makes the entry of goods through Spanish ports or airports disadvantageous.
Indeed, up until 2008, Spanish legislation required the payment of the import VAT in order to exercise the right to the deduction, a requirement which gave rise to important court proceedings due to the incompatibility of this requirement with Community legislation (those judgments were favourable for taxpayers) as was eventually confirmed by the Court of Justice in its Veleclair judgment (C-414/10).
On November 28 2014, the VAT Law reform was published which, along with the Royal Decree amending the VAT Regulations (published on December 20 2014), introduces a new system of deferral of import VAT, in application of the option provided in Community legislation.
According to the legislative change, although the VAT chargeable on the import will continue to be calculated by the customs authorities, it will be collected and paid via the VAT return for the period in which the VAT assessment is received.
The new law thus replaces the current system for collecting import VAT, under which the VAT has to be paid when the goods are released for consumption at the customs office and deducted through its inclusion in the periodic return (form 303), as output VAT and also as input VAT, thereby preventing the financial loss arising for the importer under the current system.
The regulations implementing this amendment state that this is an optional system which can be applied by taxable persons whose tax period coincides with the calendar month.
In relation to the foregoing, monthly VAT returns are filed when a €6,000,000 threshold is exceeded or where the company elects to apply the monthly refund system (which leads to additional formal obligations, such as the electronic filing of the VAT books).
In relation to nonresident companies which do not operate through a permanent establishment for VAT purposes, a priori, the new import VAT deferral system would not be applicable, unless they have to file monthly VAT returns in the terms described above.
The election to apply this new system must be made when filing the notification of commencement of activity or, otherwise, in the month of November preceding the year in which it is to take effect, although, as may be expected, for 2015, the deadline has been extended to the end of January, given that the changes will not take effect until January 1 2015. The election will relate to all the imports made by the taxable person and will be automatically renewed unless the taxable person opts out of, or stops being eligible for, the system (where the taxable person's tax period no longer coincides with the calendar month).
Arantxa de Luis (arantxa.de. firstname.lastname@example.org), Madrid
Garrigues – Taxand