Devil in the detail? Spain introduces simplified process for rectifying VAT returns

A regulation approved in Spain on August 5 2024 introduces a series of modifications to VAT forms, with the aim of implementing a new rectifying VAT return (autoliquidación rectificativa).

The intention is to simplify the procedure for rectifying VAT returns that were previously filed. These corrections may occur for several reasons, such as errors in previous VAT returns leading to an additional VAT amount to pay or to an extra VAT refund to be claimed.

The truth is that the current procedure available in Spain is extremely complex and it is necessary in some cases, and under certain circumstances, to open a review procedure with the Spanish tax authority, which can take several months to be closed, and there was an urgent need to modify it.

With this new legislation, the possibility of submitting a rectifying VAT return is permitted as a general rule, with the exception of the rectification of VAT amounts unduly charged to other taxpayers and the rectification of VAT amounts corresponding to operations under OSS and IOSS regimes. In these two cases, a special application, in written format, must be sent to the Spanish authorities.

Apart from the above two cases, the submission with the Spanish tax office of a rectifying VAT return will be possible, regardless of the result of the return (including a VAT refund claim), which had hitherto not been possible in all cases.

To be able to file rectifying VAT returns, a series of boxes and sections are added to the VAT forms – some of them complex to understand – that must be completed by the taxable person depending on the circumstances that motivate the rectification.

In this sense, the taxable person must decide on their own whether the rectification is due to discrepancies in administrative criteria, to a violation of a higher-level VAT rule (such as the VAT Implementing Regulation of the VAT Directive), or to any other reason.

The Spanish VAT rules do not give further clues as to what should be understood by ‘a discrepancy of administrative criteria’. It is not clarified if the discrepancy can be, for example, with a decision from a tax management department within the Spanish tax authorities, with the inspection body, with a Spanish court, or with any other tax administrative body in Spain. It is, therefore, an extremely complex decision that has to be taken by the taxable person when preparing their rectifying VAT return. The decision is important because depending on it, the boxes and procedure to be completed in the VAT form are different.

In addition, it is not possible to accompany the declaration with any complementary documentation that supports the claims of the taxable person.

To further complicate the matter, different boxes are included for the application of the refund. In other words, depending on the way in which the taxpayer has carried out the rectification, the same VAT form may result in two types of refunds:

• Those derived from the normal VAT regulations (a ‘normal’ VAT refund); and

• Those derived as a result of amounts erroneously paid through a previous return and that are now intended to be rectified.

The new rectifying returns will be applicable for the first time to VAT returns corresponding to the month of September 2024 and to the third quarter of 2024 for taxable persons with a monthly and a quarterly VAT assessment period, respectively.

As one can see from the above, although the idea behind this new VAT return form is good –namely, simplification, at least according to the Spanish tax authority’s explanation of the motivation behind the new legislation – it has been implemented in an odd and complex way that forces VAT-able persons to make a series of difficult decisions while preparing their VAT returns. This will make it extremely difficult to process rectifications of VAT assessments.

Since no such return has yet been filed (the first ones will be filed soon), its impact is unknown. However, it is to be expected that it will create doubts and potential errors on the part of taxable persons, with the possible imposition of penalties. What initially seemed like a good plan for companies may, in the end, be good business for the Spanish tax administration.