2Central government taxes

2.6 Spanish Value Added Tax

The European Union VAT Directives have been implemented in Spanish law (Law 37/1992, in force since January 1, 1993), and the main provisions of these Directives are harmonized in the different Member States of the EU.

VAT is an indirect tax, the main feature of which is that it does not normally entail any cost for traders or professionals, only for the end consumer, because traders or professionals are generally entitled to offset their input VAT against their output VAT.

Within Spain, VAT is not applicable in the Canary Islands, Ceuta and Melilla.

In the Canary Islands, the Canary General Indirect Tax (IGIC), in force since January 1, 1993, is very similar to VAT and is an indirect tax levied on the supply of goods and services in the Canary Islands by traders and professionals and on imports of goods. The general IGIC rate is 7%.

Ceuta and Melilla charge a different indirect tax of their own (tax on production, services and imports).

2.6.1 Taxable transactions

The following transactions are subject to VAT when they are carried out by traders and professionals in the course of their business:

• Supplies of goods, generally defined as the transfer of the right to dispose of tangible property, although certain transactions not involving a transfer of this kind may also be treated as supplies of goods for the purposes of VAT.
• Intra-Community acquisitions of goods (generally, acquisitions of goods dispatched or transported to Spanish VAT territory from another Member State).
• Imports of goods: These transactions are subject to VAT regardless of who performs them.
• Supplies of services.

2.6.2 VAT rates and exemptions

VAT rates are as follows:

The standard rate is 21%, applicable to most supplies of goods and services.

However, there is a reduced rate of 10% applicable to supplies, intra-Community acquisitions and imports of the following, among others:

• Foodstuffs intended for humans or animals, not including alcoholic beverages and soft drinks, juices and fizzy drinks with added sugar or sweeteners.
• Water.
• Housing.
• Certain pharmaceutical specialties.

This reduced rate also applies to the following services, among others:

• Transportation of passengers and their luggage.
• Entry to libraries.

There is also a very reduced rate of 4% applicable to:

• Bread, flour, milk, cheese, eggs, fruit and vegetables.
• Books, newspapers and magazines that are not mainly composed of advertising.
• Medicine for human use cars for persons with disabilities.
• Prostheses for persons with disabilities.
• Certain subsidized housing.

As an exceptional measure, in response to the crisis triggered by COVID-19, a tax rate of 0% was approved for the supply, import and intra-Community acquisition of certain medical supplies whose recipients are the public law entities, hospitals and health clinics or private charitable entities referred to in the VAT Law. These measures will remain in force through to June 30, 2023. In addition, a 4% tax rate has been established for supplies, imports and intra-Community acquisitions of disposable surgical masks, up until June 30, 2023.

On the other hand, a number of measures were approved in 2022 to alleviate the economic and social crisis, some of which were introduced in 2021 and have been extended:

1. The application, effective up to December 31, 2023, of the reduced 5% rate for supplies, imports, and intra-Community acquisitions of natural gas, briquettes and pellets made from biomass materials and firewood, used in heating systems.
2. The application of the reduced rate of 5% for the components of the electricity bill, to certain contracts and supplies made to certain electricity supply contract holders, effective up until December 31, 2023. This reduction in the tax rate was introduced in 2021, although at the time, the 10% tax rate was applicable.
3. The reduction, up until 30 June 2023, of the tax rate applicable to basic foodstuffs (0% compared to 4%) and to oils and pasta (5% compared to 10%).

Certain transactions are exempt from VAT (for example, financial and insurance transactions, medical services, educational services, rental of housing). Since the trader or professional performing these activities does not charge VAT on such activities, they do not give the right to deduct input VAT, as described further on in this report, although there are other exempt transactions (mainly those relating to international trade, such as intra-Community supplies of goods or exports) that do confer the right to deduct input VAT.

Precisely in relation to intra-Community supplies that grant the right to the deduction, despite being treated as exempt transactions (full exemption), the following measures have been approved, effective since March 1, 2020:

• In order to apply that exemption, along with the requirement of the transport of the goods to another Member State, the following substantive – not formal – conditions are established:
  1. The acquirer must have provided to the supplier a VAT identification number assigned by a Member State other than Spain.
  2. The supplier must include that transaction in its recapitulative statement of intra-Community transactions (form 349).
• In order to evidence the transportation of the goods to another Member State (necessary requirement to apply the exemption in intra-Community supplies), a series of rebuttable presumptions are established. That transport must be proven with the following means of proof:
  • Where the acquirer is the one that handles the transportation:
    • Certificate by the acquirer stating that the goods have been transported by it or by a third party in its name, and specifying the destination of the goods.
    • At least two documents related to the dispatch or transport of the goods (signed letter or CMR documents, bill of lading, air freight bill or invoice from the carrier of the goods) issued by parties unrelated to the seller and the acquirer.
    • If at least two of the documents specified in the preceding paragraph are not available, at least one of the following means of proof issued by parties unrelated to the seller and the acquirer:
      • Insurance policy covering the dispatch or transportation of the goods, or bank documents proving the payment of the dispatch or transport.
      • Documents issued by an attesting official certifying the arrival of the goods.
      • Certificate by the warehouse keeper of the goods in the Member State, confirming the storage of the goods in that Member State.
  • If the seller is the one that handles the transportation, the same provisions will apply except for the first certificate mentioned in the preceding point, which will be replaced by a mere statement by the seller that the goods have been dispatched or transported by it or by a third party in its name.
• Measures are also included to harmonize the taxation of chain transactions, that is, successive supplies of goods between different traders or professionals, which are transported directly from one Member State to another by the first supplier to the final acquirer of the chain.

  In order to determine which of the supplies has the status of exempt intra-Community supply, it is established that the transport is deemed linked to:

  • The supply by the initial supplier to the intermediary, which will constitute an exempt intra-Community supply of goods, provided the latter has communicated a tax identification number issued by a Member State other than Spain.
  • The supply made by the intermediary, where it has communicated a Spanish VAT number to the supplier. Thus, the supply by the supplier to the intermediary will be subject to and not exempt from VAT, and the supply made by the intermediary to its customer will be an exempt intra-Community supply.
• Lastly, in relation to the sales of buffer stock or consignment sales (agreements whereby a supplier sends goods from one Member State to another in order for them to be stored in the Member State of destination and available to another trader, that can acquire them after their arrival) new regulation is established which permit simplifying the VAT treatment of these transactions and reducing the administrative burden of traders, provided a number of conditions are met.

Thus, starting on March 1, 2020, these sales give rise to a single transaction⁴⁶: an intra-Community supply of goods that is exempt in the Member State of dispatch by the supplier, and an intra-Community acquisition in the Member State of arrival, by the customer when it retrieves the goods from the warehouse.

2.6.3 Place of supply of taxable transactions

Spanish VAT is charged on the transactions referred to above which are deemed to be supplied in Spanish VAT territory.

The law establishes rules for determining the place where the various transactions are deemed to take place.

• Supplies of goods: The general rule is that goods are deemed to be supplied in Spanish VAT territory if they are handed over to the recipient in Spain. However, if the goods are transported in order to be handed over to the recipient, the supply will be deemed to be made in the place where the transportation commences. There are other exceptions to the general rule, such as those established for supplies of goods to be installed or assembled, etc.
• Supply of services: As a general rule, services are deemed to be supplied at the recipient’s place of business or permanent establishment, if the recipient is a trader or professional; however, if the recipient is a final consumer, the services will be deemed to be supplied at the supplier’s place of business.

  There are, however, exceptions to this general rule:

  • Services related to real estate are deemed to be supplied at the place where the property is located. This rule also applies to services of accommodation at hotels, camping sites and spas.
  • Transportation services (intra-Community or otherwise) are deemed supplied at the recipient’s place of business, and it is no longer necessary to provide the VAT number that was required in some cases until now.
  • Services consisting of passenger transportation (whatever the recipient’s status) and of the transportation of goods (except intra-Community transportation), where the recipient is the final consumer, are taxed proportionately to the distance covered within Spanish VAT territory.
  • The intra-Community transportation of goods to final consumers will be taxed in Spain the transportation begins within that territory.
  • Certain services are deemed to be supplied in Spain where they are physically performed in Spanish VAT territory. This is the case, among others, of cultural, artistic, sports, scientific, educational, recreational and similar activities. The same rule applies to ancillary transportation services and to work on movable tangible property, experts’ reports, etc. where the recipient is not a trader (if he is, the general rule will apply, i.e., the place of supply is the recipient’s place of business).
  • Services supplied electronically and telecommunications and television and radio broadcasting services will be deemed to be supplied at the recipient’s place of business (whether it is the final consumer or a trader), unless they are supplied to a non-EU resident or to consumers domiciled in Spain and the services are used or operated in Spain. Moreover, VAT is not charged on services to final consumers that are not established in the Community.
  • In order to facilitate the compliance with the tax obligations deriving from the aforementioned rule, in the case of services supplied to final consumers, two optional special regimes are established that permit taxable persons to pay the tax owed for the supply of those services through a website (“one-stop shop”) in the Member State where they are identified, thus avoiding registration in each Member State where they carry out transactions (Member State of consumption). A distinction is made between:
    ­
    • Non-EU regime: Applicable to traders or professionals that have no type of permanent establishment or obligation to be identified for VAT purposes in any Member State of the Community. It is an extension of the special regime for services supplied electronically to telecommunications, TV and radio broadcasting services. The Member State of identification will be that chosen by the trader.
      ­
    • EU regime: Applicable to EU traders or professionals that supply telecommunications, TV and radio broadcasting services to final consumers in Member States where they do not have their place of business or a permanent establishment. The Member State of identification will be that where they have their place of business or a permanent establishment.

    It should be noted that Directive 2017/2455 establishes, effective from January 1, 2019, a threshold for determining the place of supply of these services, according to which where the total amount of this type of services provided by the supplier does not exceed €10,000, in the current or the preceding year, the services supplied to end consumers shall be deemed subject to VAT in the place of establishment of the supplier.

    According to Spanish legislation, traders or professionals may voluntarily elect taxation at destination, even if the €10,000 limit has not been exceeded, and this election has a minimum validity of two calendar years.

  • Restaurant and catering services will be deemed to be supplied in Spain:
    • Where supplied on board a vessel, an aircraft or a train during the section of a transport operation effected within the EU, if the transportation begins within Spanish VAT territory. In the case of a return trip, the return leg is regarded as a separate transport operation.­
    • In the rest of restaurant and catering services, where they are physically supplied in Spanish VAT territory.
  • The short-term hiring (30 days in general and 90 days in the case of vessels) of means of transportation will always be taxed where such means are placed at the recipient’s disposal.
  • Intermediation services are supplied according to the place where the main transaction is deemed to be performed, if the recipient is not a trader. Otherwise, the general place-of-supply rule (recipient’s place of business) will apply.
  • Finally, a closing rule is established whereby certain services which, under the preceding rules, are not regarded as taking place in the European Community, the Canary Islands, Ceuta or Melilla⁴⁷ but are effectively used or exploited in such territory, are subject to taxation in Spain.

    This closing rule has been amended by the 2023 General State Budgets Law (Law 31/2022 of December 23, 2022), coming into force on January 1, 2023, its application being confined to certain services with private parties — meaning that transactions with traders or professionals are excluded — except in the case of services pertaining to the financial sector, insurance and the leasing of means of transport, for which it continues to apply to recipients of both types.

2.6.4 VAT fixed establishment

The definition of “place of business” and fixed establishment are relevant when determining the place where transactions subject to VAT are carried out. Also, as explained below, that definition is relevant for determining who the taxable person of those transactions is.

On this basis, where a fixed establishment exists in Spanish VAT territory—on the terms defined below—and this establishment intervenes in the performance of transactions subject to VAT, the transaction will be deemed located in Spanish VAT territory and, therefore, the establishment will be deemed the taxable person for VAT purposes, with the resulting obligations (register for VAT purposes, charge the tax, meet invoicing obligations, file returns, etc.).

Another of the main implications deriving from the fact of having a fixed establishment in Spanish VAT territory is the regime that applies for the refund of the VAT borne. In this regard, if a fixed establishment exists, the general refund regime will apply, while if there is not a fixed establishment, the special refund regime for non-established traders must be used, which involves initiating a proceeding to obtain a refund of the VAT borne.

Place of business is defined in the law as the place where the taxable person centralizes the management of, and habitually exercises, his business or professional activity.

Fixed establishment is defined as any fixed place of business from which a trader or professional carries on business activities⁴⁸. In particular, the following are deemed fixed establishments for VAT purposes:

• The place of management, branches, offices, factories, workshops, facilities, stores and, in general, agencies or representative offices authorized to conclude contracts in the name and for the account of the taxable person.
• Mines, quarries or tips, oil or gas wells or other places of extraction of natural products.
• A construction, installation or assembly project which lasts for more than twelve months.
• Farming, forestry or livestock operations.
• Facilities operated on a permanent basis by a trader or professional for the storage and subsequent delivery of his merchandise.
• Centers for purchasing goods or acquiring services.
• Real estate operated under a lease or any other arrangement.

It is noteworthy that although the definition and cases in which a permanent establishment is deemed to exist are similar for purposes of direct taxes and VAT, they do not fully coincide.

In cases where a fixed establishment exists in Spanish VAT territory, due to being established in that territory and deemed a VAT taxable person, it must meet the following obligations:

1. File returns relating to the commencement, modification and cessation of the activities that determine the applicability of the tax.
2. Request from the tax authorities a tax identification number and communicate and report it in the cases established.
3. Issue and deliver invoices or equivalent documents for its transactions and keep a duplicate thereof.
4. Keep the mandatory accounting records and registers, without prejudice to the provisions of the Commercial Code and other accounting provisions.
5. File periodically, or at the request of the tax authorities, information relating to its business transactions with third persons.
6. File the relevant tax returns and pay over the resulting tax. Also taxable persons must file an annual summary return.

2.6.5 Taxable person

The taxable person is the person with an obligation to charge or pay over VAT. This obligation normally lies with the trader or professional that performs the supplies of goods or services or other transactions subject to VAT.

There are, however, some exceptions in which the taxable person is the recipient in the transaction. This is generally the case of transactions, located in the Spanish VAT territory, in which the person performing them does not have a place of business or fixed establishment in Spanish VAT territory and the recipient is a trader or professional, regardless of whether or not he is established in Spanish VAT territory.

In the last years, new cases of reversal of liability have been established (applicable to transactions for which the VAT becomes chargeable on or after October 31, 2012) in relation to (i) certain exempt supplies of real estate in which the VAT exemption is waived; (ii) supplies of real estate to enforce security interests in real estate and accord and satisfaction in whole or in part, and (iii) certain works of construction and loaning of personnel to perform the work, it being necessary in these cases for the recipient to expressly communicate in a legally valid manner, and prior to or simultaneously with the performance of the transactions, that the requirements are met for the reversal of liability to apply.

That communication can be made through a written statement signed by the recipient, under its own responsibility, and addressed to the trader or professional that makes the supply. On this basis, the recipient is able to invoke the joint liability established in the VAT Law for those who, by action or omission, whether due to willful misconduct or negligence, avoid the correct charge of the tax.

Since April 1, 2015, the foregoing list includes some cases of supplies of (i) silver, platinum and palladium; (ii) mobile phones, and (iii) videogame consoles, portable computers and digital tablets.

From January 1, 2023, on the other hand, the application of the reverse charge mechanism has been excluded, with the VAT being payable by the service provider, in the case of real estate leasing services which are subject to and not exempt from taxation, as well as in the case of real estate leasing intermediation services.

Moreover, since January 1, 2015, there is a new regime for deferral of the VAT on imports through the inclusion of those amounts in the tax return of the period in which the document evidencing the assessment made by the tax authorities is received.

It is an optional regime that may be applied by taxable persons whose tax period coincides with the calendar month (i.e., companies subject to the monthly refund regime, those whose volume of transactions in the preceding calendar year exceeds €6,010,121.04, or those that apply the VAT grouping scheme, among other cases).

Apart from the obligation to charge VAT, the taxable person must also:

• File notifications relating to the commencement, modification and end of activities.
• Request a tax identification number from the tax authorities and notify and evidence it in the cases established.
• Issue and deliver an invoice for all its transactions.
• Keep accounting records and official books (specific VAT books)⁴⁹.
• File periodically, or at the request of the authorities, information relating to its business transactions with third parties.
• File tax returns (monthly or quarterly, depending on its volume of transactions, and an annual summary return).
• Appoint a representative in order to comply with its obligations where the taxable person does not have an establishment in Spanish VAT territory. This obligation only applies to traders that are not established in the EU, unless they are established in a State with which Spain has mutual assistance arrangements in place.

2.6.6 Taxable amount

In general terms, the taxable amount for VAT purposes is the total consideration for the transactions subject to VAT received from the recipient or from third parties.

VAT legislation also establishes a series of special rules on determining the taxable amount, including rules on self-supplies of goods or services and on cases where the parties are related to each other (the taxable amount consists of the normal market value).

2.6.7 Deduction of input VAT

Under Spanish VAT law taxable persons are generally entitled to deduct their input VAT from their output VAT, provided that the goods and services acquired are used to perform the following transactions, among others:

• Supplies of goods and services subject to and not exempt from VAT.
• Exempt transactions which give entitlement to a deduction, with the aim of securing that traders act neutrally in intra-Community or international trade (e.g. exports).
• Transactions performed outside Spanish VAT territory which would have given rise to the right to deduct had they been performed within that territory. In general, the input tax paid on the acquisition or import of goods or services that are not used directly and exclusively for business or professional activities may not be deducted, although there are specific rules such as those relating to the tax paid on capital goods (partial offset).

The right to deduct input VAT is also subject to formal requirements and may be exercised within four years.

There are several deduction systems, and the main features of each are as follows:

2.6.7.1. General deductible proportion rule

This rule applies when the taxable person makes both supplies of goods or services giving rise to the right to deduct and other transactions which do not (e.g. exempt financial transactions).

Effective from January 1, 2006, the effect of subsidies on the right to deduct VAT was eliminated.

Under the deductible proportion rule, input VAT is deductible in the proportion which the value of the transactions giving the right to deduct bears to the total value of all the transactions carried out by the taxable person in the course of his business or professional activity.

In other words, the percentage of deductible VAT is determined under the following formula:

The resulting percentage is rounded up.

Effective starting on January 1, 2014, and in force indefinitely, the transactions carried out from permanent establishments outside the Spanish VAT territory will be excluded from the calculation of the general deductible proportion regardless of where the costs for performing the transactions have been borne or incurred.

2.6.7.2. Special deductible proportion rule

This system is generally elected by the taxable person (the election must normally be made in the month of December prior to the year in which it will apply). The basic features of this deduction system are the following:

• VAT paid on acquisitions or imports of goods and services used exclusively for transactions giving the right to deduct may be deducted in full.
• VAT paid on acquisitions or imports of goods and services used exclusively for transactions not giving the right to deduct may not be deducted.
• VAT paid on acquisitions or imports of goods and services used only partly for transactions giving the right to deduct, may be deducted in the proportion resulting from applying the general deductible proportion rule.

The special deductible proportion will apply obligatorily where the total sum of deductible VAT in a calendar year by application of the general deductible proportion rule exceeds by 10% or more that which would result by application of the special deductible proportion rule.

2.6.7.3. Deduction system for different sectors of business activity

Where the taxable person carries on business activities in different sectors, it has to apply the relevant deductible rules to each of those activities separately.

“Business activities in different sectors” means activities classed in different groups in the National Classification of Business Activities and the deduction systems applicable to them are also different (this requirement is deemed to be met, among other cases, where under the general deductible proportion rule, the percentage of deductible VAT differs by more than 50 percentage points).

In such a case, the taxable person must apply the general or the special deductible proportion rule, on the terms described above, in each of the business sectors. The VAT paid on acquisitions or imports of goods and services that cannot be specifically allocated to any of the activities will be deducted in the general deductible proportion resulting from its activities as a whole.

It should be noted that starting in 2015, the calculation of the general deductible proportion applicable to common input VAT, in the deduction system for different sectors of business activity, excludes the volume of transactions under the special VAT grouping scheme.

2.6.8. Refunds

If the VAT charged exceeds the amount of deductible VAT, the taxable person must pay over the difference in its periodic (monthly or quarterly) returns.

If, conversely, the amount of deductible VAT exceeds the amount of VAT charged, the taxable person may request a refund of the excess which, as a general rule, can only be claimed in the last return for the year.

However, provided certain regulatory requirements are met, taxable persons who register on the Monthly Refund Register may claim a refund of the balance existing at the end of each assessment period.

Registering on this Refund Register carries with it the obligation to file VAT returns monthly by telematic means (regardless of the taxable person’s turnover) as well as the obligation to keep VAT registers electronically.

The period for obtaining the refund is six months from the end of the period for filing the last return of the year (January 30 of the immediately following year) as a general rule and from the end of the period for filing monthly returns in the case of taxable persons registered on the Monthly Refund Register.

There are specific rules on the refund of VAT paid in Spain by traders that are not established in Spanish VAT territory. To obtain refunds in these cases, the following requirements must be met:

• Persons applying for a refund must be established in the EU or, otherwise, must evidence a reciprocal arrangement in their country of origin for traders or professional established in Spain (in other words, Spanish traders would obtain a refund of an equivalent tax in their country of origin).

  Said reciprocity requirement has disappeared with the approval of Law 28/2014, for the tax borne on restaurant, hotel and transport services linked to the attendance at trade fairs, conferences and exhibitions and the access to them, as well as in relation to the acquisition or import of molds, templates or equipment used to manufacture goods which are exported to a non established trader, provided that such equipment is also exported or destroyed when no longer used.

• A trader that is not established must not have carried out transactions in Spanish VAT territory that would make it qualify as a taxable person.
• Unlike taxable persons established in the EU, those persons who are not established in the EU must appoint a representative, resident in Spanish VAT territory; the representative will be responsible for fulfillment of the relevant formal and procedural requirements and will be jointly and severally liable in the case of incorrect refunds and sufficient security may be sought from it for these purposes.
• Input VAT is refundable in Spain if it was paid on acquisitions of goods and services or imports of goods used to perform transactions that give the right to deduct (both in Spain and in the country where the trader is established).

Refund claims may only be related to the immediately preceding year or quarter, and the time limit for filing them is September 30 of the following year⁵⁰, and it may not be less than €400 if the claim is filed quarterly, or less than €50 if it is annual.

2.6.9. Special VAT cash-basis accounting scheme

Since January 1, 2014, a “Special VAT cash-basis accounting scheme” can be applied by taxable persons with a volume of transactions not exceeding two million euros in the preceding calendar year. Once the taxable person has elected to apply it, it shall be deemed extended save for waiver (which will have a minimum validity of three years) or exclusion therefrom due to one of the causes listed in the law.

For an operator that elects to apply this scheme, the chargeable event in all its transactions (except for certain ones established in the law) arises when the total or partial price is collected, in respect of amounts effectively received, with a limit of December 31 of the year after that in which the transaction was carried out, at which time the tax will be chargeable in all cases even if the price has not been collected.

This cash-basis accounting scheme also affects the VAT borne by the taxable persons that elect to apply it, meaning that they can only deduct VAT when the payment is made.

Due to the amendment of the rules on the chargeability in transactions carried out under this special scheme, the deduction of VAT borne by any trader or professional (even though it has not elected to apply it) that receives supplies of goods or services made by operators that apply the scheme will be deferred until the payment or, as the case may be, until December 31 of the year after that in which the transaction was carried out.

The new rules on the chargeable event in supplies of goods and services by operators subject to the special scheme are accompanied by changes in relation to invoicing obligations, the content of the VAT registers and the information to be provided in the informational returns on transactions with third parties, which are basically summarized as follows:

• Regarding invoicing obligations, it is necessary to include a specific reference to the application of this scheme.
• In relation to the content of the VAT registers, certain additional content is included (payment/collection dates, amounts and means of payment used) in order to permit monitoring the application of the specific rules on the chargeable event, both at operators subject to the special scheme and at the recipients of the invoices.
• A dual system is used for recording those transactions in the informational return of transactions with third parties.

2.6.10. Special VAT grouping scheme

This system is the result of the transposition into Spanish legislation of the option, set out in the European Union VAT Directive, to treat entities that are sufficiently related financially, economically and from an organizational standpoint, as a single taxable person.

“Sufficiently related” is defined in the law as applying to a parent company (which cannot be the subsidiary of another company in Spanish VAT territory, on the terms described) and the entities over which it has effective control, either because it holds a direct or indirect interest in their capital stock of at least 50%, or because it owns a majority of the voting rights, maintained throughout the calendar year, provided that the entities included in the group have places of business or fixed establishments located in Spanish VAT territory.

This system is optional and applies for at least three years, which term is automatically extendible, and any potential waiver of the system also applies for at least three years.

The option must be elected by the parent company prior to commencement of the calendar year in which it must take effect. The decision to elect the special system must be adopted by the boards of directors of each of the entities that will belong to the group.

In its simplest form, the system merely consists of the ability to aggregate the individual VAT returns of the group companies that elect to apply the system, so that the balances of offsettable or refundable VAT of some companies may be offset immediately against the balances of tax payable belonging to the others, thereby reducing or eliminating any financial expense resulting from reporting balances to the tax authorities, for which a refund cannot be claimed as a general rule until the final tax return of the year.

Optionally, group companies may request to use a specific method for determining the taxable amount, deductions and waiver of exemptions in intra-group transactions.

Under this specific method, the taxable amount would be any direct or indirect costs incurred in whole or in part in supplying goods or services to group companies, provided VAT has actually been paid on them (the costs on which no VAT has been paid cannot be included).

This optional method also envisages the power to waive certain exemptions that may be applicable to intra-group transactions, a power which may be exercised on a case-by-case basis for each transaction, and a special system is established for making deductions.

As a general rule, the special system for groups of companies establishes a series of specific obligations for the parent company of the group, such as, for example, the obligation to keep a cost accounting information system and prepare a report supporting the allocation method used (in the case of the extended version of the system).

The head company must file a joint return once all the individual returns of the group entities have been filed. VAT is settled on a monthly basis, regardless of the volume of transactions.

The group of entities may also elect to apply the new monthly refund regime, in which case the parent company will be responsible for filing the relevant census declaration.

2.6.11. Chargeability and tax return period

In general, the tax becomes chargeable (i) in supplies of goods, when they are placed at the disposal of the acquirer (or, as the case may be, when the supply is made according to applicable legislation), and (ii) in supplies of services, when the taxable transactions are carried out, executed or fulfilled. However, in case of advance payments, the tax becomes chargeable when the price is collected in full or in part, on the amounts actually received.

Generally, the VAT period coincides with the calendar quarter. VAT returns must be filed in the first twenty calendar days of the month following the tax period, that is, from 1 to 20 of April, July and October, and from 1 to 30 of January for that relating to the fourth quarter. Along with the fourth quarter VAT return, the annual VAT recapitulative statement (Form 390) must be filed.

However, in cases in which the volume of transactions of the taxable person in the immediately preceding calendar year calculated according to the provisions of the VAT Law, has exceeded €6,010,121.04, or if the taxable person is subject to the special scheme for groups of entities mentioned in the preceding section, or the monthly refund scheme, the assessment period coincides with the calendar month. In these cases, since the entry into force in July 2017 of the immediate supply of information system (SII)⁵¹ , VAT returns must be filed during the first thirty calendar days of the month following the relevant monthly assessment period, or until the last day of February in the case of the monthly VAT return for January. These taxable persons are exempted from the obligation to file the annual return (form 390).

These VAT returns must be filed telematically.

2.6.12. Invoicing obligations

The invoicing obligations are a basic element of the application and settlement of VAT. In this regard:

• The invoice is the means which taxable persons must use to fulfill the obligation to charge VAT to the recipient of the taxable transaction.

  The obligation to issue and deliver an invoice for each transaction carried out applies to all traders and professionals. The trader or professional who issues the invoice must also keep a copy or counterfoil of the invoice.

• The recipient of a transaction subject to VAT must be in possession of an invoice in order to be able to deduct the VAT borne.

In accordance with Spanish legislation, the obligation to issue an invoice applies not only to traders or professionals but also to those who do not have that status but who are VAT taxable persons, and in respect of the supplies of goods and services made in the performance of their business which are deemed located in Spanish VAT territory, even if they are not subject to or are exempt from VAT.

As stated in the section in which we analyzed the concept of permanent establishment, the fact of having an establishment in Spanish VAT territory that intervenes in the performance of transactions subject to VAT means, among other obligations, that due to being established in Spanish VAT territory, it must register for VAT purposes and issue invoices for the transactions in which it participates. For these purposes, the establishment will have the same consideration as a Spanish entity.

For these purposes, according to Royal Decree 1512/2018, of December 28, 2018, amending, among others, the VAT Regulations, the legislation applicable to invoices issued by taxable persons subject to special regimes establishing a single point of contact for services supplied electronically, consisting of telecommunications, radio broadcasting and television services, which to date was that of the Member State of consumption, shall now be the legislation of the Member State of identification. This avoids the taxable person being subject to different legislations on invoicing.

Accordingly, Spanish invoicing legislation will apply to the supplier of the electronic services when Spain is the Member State of identification.

As regards the content of invoices, they must contain (in general and except in certain specific cases) the following data:

1. Number and series, if any. The numbering of the invoices within each series must be correlative.
2. Issuance date.
3. First and last names, business name or complete corporate name of the party obliged to issue the invoice and of the recipient of the transaction.
4. Tax identification number attributed by the Spanish tax authorities or by those of another member State of the EU, with which the party obliged to issue the invoice has performed the transaction.
5. Tax identification number of the recipient, in the following cases:
   • Exempt intra-Community supplies.­
   • Transaction in which the recipient is the VAT taxable person thereof (reverse charge mechanism).­
   • Transactions performed in Spanish VAT territory where the trader or professional obliged to issue the invoice is deemed established in that territory.
6. Address of the party obliged to issue the invoice and of the recipient of the transaction.
7. Description of the transaction, specifying all the data necessary to determine the VAT taxable amount and the VAT payable, including the transaction unit price without VAT, and any discount or reduction not included in that unit price.
8. Tax rate/s applied to the transactions, including, as the case may be, the compensatory charge rate, which must be specified separately.
9. The VAT payable, if any, specified separately. That amount must be expressed in euros.
10. The date of performance of the transactions documented in the invoice or, as the case may be, the date on which the advance payment has been received, provided that it is different from the invoice issuance date.

The invoice must be issued in the following periods:

• As a general rule, at the time the transaction is performed.­
• If the recipient of the transaction is a trader or professional acting as such, before the 16^th day of the month following the tax return period in which the transaction has been carried out.