We begin the year with good news since, thanks to the deployment of the Spanish tax reform Law 26/2014 (by means of the Royal Decree 1073/2014), the payment of VAT on imported materials can be deferred until the deadline for submitting the 303 return (quarterly VAT return) corresponding to the period when the notice with the amount to settle with the Customs for such tax has been received (Customs form 031).
Until December 2014, VAT on import was paid to the Customs Authority within an average term of 10 days since the reception of the form 031, whereas its deduction was applied in the VAT return 303 for the corresponding calendar quarter. This could cause, for an importing company, a relevant reduction in its cash flow, as any VAT amount that had to be paid to Customs in January had to wait for its deduction in VAT return until April, when the corresponding quarterly form was due for filing.
But the recent change in Spanish VAT regulations derived from the fiscal reform Law, opens up the possibility of reducing the financial needs derived form the “traditional” system for settling import tax by the request of application of this new method, which requires the following:
a) The company to be filing monthly VAT returns with the Tax Office, either for compulsory reasons (any company which is considered as a large business for tax purposes, as its turnover is beyond 6 million Euros in the previous calendar year) or for having applied to be registered for monthly filings as a voluntary option, and
b) Applying for being registered in the new method for being entitled to include import VAT amounts in the periodical 303 VAT returns.
Applications for the options above would have to be normally filed with the Tax Office in the month of November, prior to the year when we wish the new method to start. But being the RD 1073/2014 published only last December, and coming into force since 1st of January 2015, an extraordinary period has been open until the end of this month, so any company can apply for the new method to be starting since February 2015.
Therefore , given the very short time available, we recomment importing companies to perfom a quick analysis of the improvements that the new method could entail in terms of working capital to determine whether to benefit from it or not. Obviously, the fact that the company should benefit voluntarily to a monthly VAT declaration should also be evaluated, but if the company is are already obliged to a monthly regime, the advantage of the new method is clear