The sudden temporary closure of many businesses due to the COVID19 current scenario has caused them significant cash constraints. This negative cash flow can be somehow minimized through the appropriate tools offered by Spanish tax regulations previously to the pandemic.

VAT cash

Today, we would like to focus your attention on the possibility of obtaining VAT refunds through your monthly tax returns instead of having to wait up until the end of the calendar year. This can be achieved through the so – called REDEME VAT scheme (which stands for Registry of Monthly Refunds). Let us explore a bit more the main characteristics of this option.

✔ As a general rule, VAT Spanish taxpayers whose VAT tax returns result negative because they have paid more input VAT than charged output VAT to their clients, can elect to apply for the VAT refund only at the end of each calendar year. This implies having to finance the excess input VAT throughout the whole year.

✔ As opposed to this, the special scheme permits applying for the VAT refund on a monthly basis, through the filing of monthly VAT returns, irrespective of the company’s turnover. Taxpayers willing to elect for this special scheme need to comply with the following requirements:

  1. Filing of a census tax return so as to apply for the registration in the special scheme. This has to be done in the month of November previous to the fiscal year in which the scheme is to be applied. However, it is important to note that the registration can also be filed during the year within the term to submit periodic VAT returns and shall be effective as from the day following the end to liquidate such tax returns.
  2. Being up to date with tax payments.
  3. Not being excluded from this scheme in the 3 years previous to the one when the new application is filed.
  4. Not being under the causes of revoking the Tax ID number.
  5. If the company is subject to the VAT Group tax scheme, the application must be agreed by all the companies forming part of such Group and they must all meet the requirements to elect for it.

Taxpayers are obliged to remain in this registry during the year in which the application was filed (if this was done throughout the year) and the year after.

✔ Under this scheme, VAT registries must be kept online through the Spanish Hacienda web page. This implies sending the details of the VAT registries within a period of four days as from when invoices are issued or accounted, when these are received. This obligation always applies to companies with a turnover exceeding 6 Mio € as well as those forming part of a VAT Group.

✔ Despite this monthly refund scheme may imply more burdening compliance obligations concerning VAT registries for companies with a turnover not exceeding 6 Mio €, it is worth evaluating the convenience of applying for it based on the VAT cash

Publicado el 05-2020 por PBS