Input VAT Before and After the Business Activity is Always Deductible in Spain
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VAT often accumulates before a company begins its ordinary business activity and likewise, when a company is undergoing a winding-up process and is no longer active. Two rulings will help us understand that under no circumstance will the input VAT be lost in either of these two stages of a business.
A consultation made to the Spanish administration on 7.7.2011, based on the criterion of a ruling from the ECJ of 3.3.2005 (C-32/03), states that the business status, and therefore that the input VAT shall be always deductible, will be maintained until the business has been definitively liquidated, even if the ordinary business activity towards the end is no longer carried out, consisting only of extraordinary administrative acts such as the sale of fixed assets of the business or the payment of a lease which cannot be terminated until the company ceases its activity (because, for instance, the agreement does not contemplate early termination of the lease). Therefore, the fact that removal from the Companies Register has been requested does not prevent the company from requesting the refund of input VAT if the pertaining returns are regularly presented and the invoices with input VAT meet all requirements.
Likewise, in a recent ruling on 1.3.2012 (C-280/10), the ECJ stated that all input VAT accrued prior to a future partner or businessman beginning business activity shall always be deductible, even if the invoices received contain a Spanish tax number (NIF) other than the one pertaining to the future company or business.
In short, in the absence of evidence of deceit or bad faith, VAT should never be an expense for the businessman.
Javier Valls, LL.M. Abogado, (Barcelona/Spain)
ABOUT THE AUTHOR: Javier Valls, LL.M. (Spanish Tax Lawyer)
Javier Valls is managing partner at Javier Valls Abogados, a boutique law firm specialized in international and Spanish tax law with office in Barcelona. He graduated in Law by the Universidad de Barcelona and is registered in the Barcelona Bar Association. After working as a tax lawyer in Barcelona, he moved to Germany, where he specialized in international and European tax law. During those years, he worked at the international tax department for one of the big four auditing companies in Stuttgart, and later in another well-known German law firm specialized in international tax.
When once again in Spain, he worked for the international tax department of the Ernst & Young in Barcelona, as well as in another law firm for some years. He is also president of the international and European law group of Barcelona's Bar Association and part-time tax professor at the Faculty of Law of the Universidad de Barcelona.
Copyright Javier Valls Abogados
More information about Javier Valls Abogados
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
Likewise, in a recent ruling on 1.3.2012 (C-280/10), the ECJ stated that all input VAT accrued prior to a future partner or businessman beginning business activity shall always be deductible, even if the invoices received contain a Spanish tax number (NIF) other than the one pertaining to the future company or business.
In short, in the absence of evidence of deceit or bad faith, VAT should never be an expense for the businessman.
Javier Valls, LL.M. Abogado, (Barcelona/Spain)
ABOUT THE AUTHOR: Javier Valls, LL.M. (Spanish Tax Lawyer)
Javier Valls is managing partner at Javier Valls Abogados, a boutique law firm specialized in international and Spanish tax law with office in Barcelona. He graduated in Law by the Universidad de Barcelona and is registered in the Barcelona Bar Association. After working as a tax lawyer in Barcelona, he moved to Germany, where he specialized in international and European tax law. During those years, he worked at the international tax department for one of the big four auditing companies in Stuttgart, and later in another well-known German law firm specialized in international tax.
When once again in Spain, he worked for the international tax department of the Ernst & Young in Barcelona, as well as in another law firm for some years. He is also president of the international and European law group of Barcelona's Bar Association and part-time tax professor at the Faculty of Law of the Universidad de Barcelona.
Copyright Javier Valls Abogados
More information about Javier Valls Abogados
View all articles published by Javier Valls Abogados
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
