VAT recovery is a resource available to all companies to obtain a source of liquidity from the expenses generated by their own activity, however it is a practice that is often omitted by many due to not considering it important, not having the staff or the complexity of the process itself, for example in the case of expenses for which only the receipts are available as proof.
As companies grow and develop more complete financial departments, or because of a company or economic crisis, they begin to look for new methods to improve their cash flow. At this point many start to recover their VAT through specialised companies, but what about the VAT from previous years, have they lost it?
No. Tax legislation in countries where tax refunds are compulsory, as a general rule, allows for the recovery of previous years.
The retroactive nature of VAT recovery
In Spain, VAT on travel and representation expenses for the last four years can be recovered. This is set out in the second transitory provision of Royal Decree 1619/2012, of 30 November, approving the Regulation governing invoicing obligations, which refers to the replacement or exchange of substitute documents (tickets, receipts or simplified invoices) for invoices.
Specifically, the second paragraph establishes that “the replacement or exchange of the aforementioned documents may be carried out within a period of four years following the accrual date of the transactions documented therein”. The doctrine of the Directorate General for Taxation also refers to this period, among others, in Binding Consultation 0341-14 of 11 February.
This is a common feature in most EU countries, varying mainly in the time and process to be followed. For example, in France it is two years, Germany four or Switzerland five.
Do I have to re-open exercises that have already been closed or do I have to carry out additional exercises?
No. When you have a simplified invoice or receipt, VAT is accounted for as an expense. If you subsequently receive the invoice that was not issued at the time with the input VAT, and provided that this VAT can be considered deductible, this will produce the accrual of an accounting income that will be computed in the accounts corresponding to the positive adjustments in indirect taxation, in other words, once you obtain the complete invoices, you will not have to wait for the tax authorities to return this money to you, you will simply save it in your next tax return, thus obtaining immediate liquidity. This accounting income will also be taxable and attributable to the year in which the invoices have been received and the input VAT it reflects has been considered deductible.
Simplify the process with the help of experts
Due to the complex legislation and the enormous amount of documents to be processed, it is normal to delegate this work to companies specialised in VAT recovery. This is particularly important when starting out, as the volume of documentation is multiplied by 4, thanks to its retroactive nature.
Companies such as 60dias can process 100% of the receipts and recover up to 80% of the VAT on expenses for the last four years, i.e. all but those receipts that have deteriorated to the point of being illegible, or those issued by businesses that have ceased trading. This simple management is of great benefit to companies, and is a right granted by law.