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Companies pay the Tax Office 800 million euros yearly on the VAT of invoices pending payment.

10-02-2011

Companies pay the Tax Office 800 million euros yearly on the VAT of invoices pending payment.

….and what is worse .... will most likely never collect payment of these invoices!

This has been made clear to the Financial Department within the Tax Office, which in turn are asking the Government to propose that the VAT should be paid at the time when it has been collected and not before hand.

As we the businesses of this country well know, as from the moment we issue an invoice we are obliged to pay VAT to the Tax Office through the inclusion in the relevant tax model (303) in respect to VAT due. Whether the invoice has been paid or not, the mere issuing of the invoice and corresponding "accrual" of VAT, requires us to make payment.

This for many who are unfamiliar with this procedure might find it barbaric, but it forms part of our legal system on taxation, which is to impose that at the time of invoicing, it is the obligation by the part of the business to make payment to the tax office. The entrepreneurs of this country have spent decades demanding that this should be changed because it gives the impression that here the only party that always wins, is the Tax Office, which seems to ignore the fact of unpaid invoices (thus not even acknowledging the crisis) and they COLLECT ALWAYS.

Imagine the case: A diligent employer has finished a job or supplied goods (or both) and therefore, happily issues the invoice. As it happens time goes by and he is unable to collect payment. The moment arrives when he has to make payment to the Tax Office for the IVA he has charged and he is obligated to pay IVA he has not collected, but let us not forget that….HE HAS NOT COLLECT ANY PAYMENT, NOT ON IVA, OR ANYTHING (materials, labour, electricity, gasoline, etc, etc). It hardly seems fair, surely.

Due to this, as of July 2010 a policy, permits states to harmonize this topic so that it is possible to pay at the time payment has been made to the invoice (or at least partial payment has been made). The problem is that the implementation may be delayed in Spain until 2013 ... and we are sure that many companies will collapse within this period of time.

Some amendments to the Law of Sustainable Economy are currently being debated in Parliament to reflect this possibility, although it seems difficult to make inclusion in the final text. Businesses will continue to keep their fingers crossed waiting for logic to prevail on this ancestral mode of our fiscal understanding in which it is transparent the injustice of our taxation system.

Cristobal Ruíz Marín
Tax Advisor

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