Requesting refund of input VAT in the country of origin

Actualizado: 21 jun 2021

The refunding of VAT in the country of origin is a very significant advantage and unknown by the majority of companies. We are trying to be practical. Thus, we will focus on the main cases, leaving the more specific, such as companies located in Ceuta, Melilla and the Canary Islands, for a later date.

When does it apply?

The important fact is that, if VAT had to be paid on business activity carried out in a European Union (EU) country in which the company is not established, it is possible, given few specific conditions, that a refund by the issuing country may be obtained. The refund typically refers to services not goods, because the revision will be applied to intra-community VAT in this case with few exceptions.

Normally, VAT refund applies to travel expenses such as hotels, transport, conferences, etc. That's to say it applies, although not exclusively, to the large majority of travel expenses. As such, depending on the type of company, it can end up being a significant portion of its income statement.

On the other hand, and depending on each Member State, there are expenses that can be accepted or not for these items. For example, if even in the majority of EU countries hotel expenses are accepted, there are numerous exceptions (e.g. Belgium, France, Ireland…). Likewise, depending on the expense item, the deductibility may not be 100%, but less, establishing a multitude of assumptions depending on the case.

Mechanisms and procedures. The 360 model

The procedure for claiming the VAT refund is to present a request, via the 360 model, before the AEAT (Agencia Estatal de Administración Tributaria [State Tax Agency]). Once approved the AEAT proceeds with the request for refund before the corresponding EU Member State. The request for an input VAT refund may be presented annually, in which case the term ends on the 30th September of the following year for related invoices or for shorter periods, provided a minimum amount varies in each of the cases (See Table 1).

Table1: Countries minimum amounts for filling the VAT refund application for fiscal year 2015.

In order to be able to execute the declaration you will necessarily have to be registered to the Tax Agency Electronic Notices. An individual electronic presentation by the invoicing country of origin will have to be made, attaching PDF invoices, the purpose being that when considered necessary the country of origin can carry out a check of the amounts requested in the presentation.

Once the declaration is presented, two emails will be received: one from AEAT and another from the recipient country, giving us a reference and tracking number, and once the file has been processed, another notification on behalf of the destination country, informing us of the total or partial estimation of the request, in which they will inform the receipt or rejection of the estimated amount.

Input VAT refund terms

The Member State responsible for the refund has four months for consideration, and, in case of total or partial refusal, the company will have a period of two months to plea. If additional information is requested, these terms may be extended to eight months after the original request. Once the country of origin decides on the refund, it will have to be made in the next ten days. Otherwise, the debt would generate interest on arrears.

We therefore find ourselves with a possibility of recovering some amounts that, otherwise, would automatically be reflected in the company's balance. In addition, it is surprising that many refunds are not made, this may be caused by the lack of knowledge about this mechanism that Spanish Small and Medium Enterprises can trigger to claim a VAT refund.

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