According to recently-published European Commission studies, the VAT gap in Spain has been decreasing, although at more than EUR10bn the difference between VAT paid and VAT that should be paid is still significant compared to other EU Member States.
The Spanish government was urged to find a solution which will stop the VAT leakage from the financial system, and so tax authorities introduced a new strategy to modernise VAT administration through the new system of ‘Immediate Supply of Information’ (S.I.I.).
While the new rules are still at draft Royal Decree stage and pending approval, the authorities ideally want this to be effective in 2017, so taxpayers should start assessing all information related to implementation to ensure compliance with new VAT rules.
In essence, qualifying companies need to electronically supply data from Spanish VAT books within four working days; where third-party billing or customer self-billing is involved, the deadline is extended to eight days.
The tax authorities believe this will improve tax control and assist taxpayers to obtain data for VAT returns and speed up the refund process.
It will be compulsory for all taxpayers who:
- are part of a VAT group;
- are considered a large size company (invoicing over €6.01 million a year) or
- are applying the monthly refund scheme i.e. REDEME group
Any other taxpayer can also apply for SII on a voluntary basis, independent of the type of activity carried out or the VAT status as an established or non-established entity. For SII, taxpayers will need to provide:
- Invoices issued and received
- VAT calculations
- The application of the reverse charge
- Intra-community arrivals and dispatches
- Certain additional information which at present is not included in such books (like description of the transactions, the VAT Period, etc.)
- The method to rectify prior registry entries
This amendment is a first step to increased visibility of transactions in Spain; the next step would be to train tax officers in how to analyse such possessed data to prevent fraud more accurately.
It has to be emphasised that Spanish authorities are preparing some incentives for taxpayers, such as deadline extensions and faster refund proceedings, which should help to embrace this change.
And while those advantages should not be belittled, they are more of a natural consequence of introducing this system than the good will of tax authorities.
This system should become fully operational from 2017 and it may sound like a distant future, but this amendment is significant one, so starting preparation soon should help to go through transition period smoothly.
Spain's plans for VAT Immediate Supply of Information (SII) | TMF Group
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