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Practical Handbook VAT 2021

Modification of the taxable base:

The Act provides, inter alia, for the following grounds for amendment:

  1. When the consideration has been provisionally fixed .

    Example:

    If budgeted community charges are invoiced together with the lease of the premises, the accrual is based on the provisional charges.Once the definitive figures are known, the rectified invoice must be issued, charging the differential tax at the rate in force at the time of accrual.The lessor shall include this contribution in the tax return for the period in which the correction is made.

  2. When return containers and packaging which can be reused .

    Example:

    The sale of milk in glass bottles for reuse involves the levy of the full consideration.Subsequently, when the bottles are returned, the taxable amount must be modified.

  3. When discounts and bonuses are granted after the transaction has taken place.

    Example:

    The rebates granted in a year for the previous year's turnover give rise to a reduction in the tax base.

  4. When is rendered ineffective in whole or in part the taxable transactions or the price is altered.

    Example:

    The return of goods due to defects in quality will result in the rectification of the taxable amount because the transaction is void.

  5. When the addressee of the transactions subject to has not paid the charged taxes in the following cases:

    • Insolvency proceedings: When, after the accrual of the transaction, the recipient of the transaction is declared bankrupt.

      The modification may not be made after the expiry of a period of three months from the day following publication in the Official State Gazette of the order declaring bankruptcy.

      For example, if in an insolvency proceeding the order of declaration of insolvency was published in the BOE on 30 January, the last day valid for modifying the tax base is 30 April.

    • When the credits corresponding to the taxed quotas for the taxed transactions are totally or partially uncollectible.

      Bad debt.Necessary requirements:

      1. 1 year has elapsed since the accrual of the tax without all or part of the claim having been recovered.However, where the holder of the debt-claim is not a large undertaking, the period referred to above may be six months or one year.

        In the case of forward or deferred transactions, one year must have elapsed since the expiry of the unpaid instalment(s) in order to proceed to the proportional reduction of the taxable amount.Likewise, this period may be 6 months or one year for entrepreneurs or professionals who do not have the status of a large company, i.e. when their turnover during the immediately preceding calendar year has not exceeded 6,010,121.04 euros.In this type of transaction, it is sufficient to request collection by means of a judicial claim for one of the instalments or by means of a notarial summons in order to proceed to modify the tax base in the proportion corresponding to the unpaid instalment or instalments.

        In the case of transactions to which the special cash basis scheme is applicable, this condition shall be deemed to be fulfilled on the date on which the tax becomes chargeable by application of the deadline of 31 December of the year immediately following that in which the transaction was carried out.

        Notwithstanding the provisions of the preceding paragraph, in the case of instalment or deferred price transactions, a period of six months or one year must have elapsed between the expiry of the relevant instalment or instalments and the date on which the transaction becomes due.

      2. Reflection of this circumstance in the Register Books.

      3. Judicial claim for collection, or notarial demand, even in the case of claims secured by public bodies.

        In the case of credits owed by public bodies, the judicial claim or notarial summons is replaced by the certificate issued by the competent body of the debtor public body in accordance with the report of the Comptroller or Treasurer of that body in which the obligation and its amount are recognised.

The change must be made within 3 months of the end of the 6-month period or, where applicable, 1 year after the accrual of the tax.

In the case of transactions to which the special cash basis scheme applies, this three-month period for making the modification shall be calculated from the deadline of 31 December of the year immediately following that in which the transaction was carried out.

The recipient of the transactions must be acting as a trader or professional or, otherwise, the taxable amount of the transactions, excluding VAT, must exceed EUR 300.

The following common rules apply to the cases of declaration of bankruptcy and uncollectible claims :

  1. The taxable amount shall not be changed in the following cases:

    1. Claims secured by collateral, to the extent of the secured portion.

    2. Receivables guaranteed by credit institutions or mutual guarantee societies or covered by a credit insurance or surety insurance contract, in respect of the part guaranteed or insured.

    3. Credits between related persons or entities.

    4. Credits owed or guaranteed by Public Bodies, except in the case of credits that have the status of uncollectible, provided that a certificate is provided by the competent body of the Public Body recognising the non-payment.When the certificate from the competent body is requested, in accordance with the Auditor's or Treasurer's report, it is understood that the period for the reduction of the tax base is interrupted until the certificate is available (DGT n.º V0615-11).

  2. Nor shall the taxable base be modified when the recipient of the transactions is not established in the territory where the tax applies, nor in the Canary Islands, Ceuta or Melilla.

    However, in the case of bankruptcy declared in insolvency proceedings conducted by a court of another Member State to which Regulation (EU) 2015/848 applies, the reduction of the taxable amount shall be allowed where the recipient is established in another Member State.(V3346-20).

  3. Nor shall the tax base be modified in accordance with Article 80(4) of the VAT Law (for uncollectible debts) after the declaration of insolvency due to debts corresponding to amounts charged for transactions which accrued prior to the declaration of insolvency.

  4. In cases of partial payment prior to the aforementioned amendment, Value Added Tax shall be understood to be included in the amounts received and in the same proportion as the part of the consideration paid.

  5. The rectification of the deductions made by the recipient of the transactions will determine the creation of the corresponding credit in favour of the Treasury.

    If the recipient of the taxable transactions was not entitled to full deduction of the tax, he shall also be liable to the tax authorities for the amount of the non-deductible tax liability.

The modification of the taxable base is conditional, in these cases of declaration of insolvency and uncollectible credits, to compliance with the following requirements:

  • The taxable person must prove that he has sent the corresponding corrective invoice to the recipient.

  • The transactions must have been invoiced and accounted for by the creditor in a timely manner.

  • The modification must be communicated to the Administration.This obligation to notify changes in taxable income, both for the creditor and the debtor, must be carried out electronically, using a specific form available at the AEAT's electronic headquarters at .

    The creditor's notification must be made within one month of the date of issue of the corrective invoice, and must state that it does not refer to guaranteed, secured or insured credits, to credits between related persons or entities, or to transactions whose recipient is not established in the territory where the tax applies or in the Canary Islands, Ceuta or Melilla, in the terms set out in Article 80 of the VAT Law and, in the case of uncollectible credits, that the debtor has not been declared bankrupt or, where applicable, that the corrective invoice issued is prior to the date of the order declaring bankruptcy.

    Together with this communication, and prior to it, the creditor must send via the electronic register of the AEAT:

    • A copy of the corrected invoices, showing the dates of issue of the corresponding corrected invoices.

    • In the case of uncollectible debts, the documents proving that the creditor has requested the recovery of the claim by means of a judicial claim against the debtor or by means of a notarial demand.

    • In the case of debts owed by public bodies, the certificate issued by the competent body of the debtor public body.

    In the notification from the recipient who is a business or professional, the receipt of the corrective invoices must be reported, indicating the total amount of the corrected quotas including, where applicable, that of the non-deductible quotas, within the same period established for the filing of the self-assessment corresponding to the period in which the corrective invoices for the transactions have been received.

Once the reduction of the tax base has been applied, it will not be modified upwards even if the total or partial recovery is obtained, except in the following cases:

  • If the taxable person withdraws the legal claim against the debtor or reaches a collection agreement with the debtor after the notarial summons.

  • When the recipient is not acting in the capacity of a trader or professional, and if he has not paid the debt, it shall be understood that the VAT is included in the amounts received and in the same proportion as the part of the consideration received.

  • When it is agreed to terminate the insolvency proceedings in the following cases:

    • Once the Provincial Hearing's order has been signed, the appeal must be revoked of the tender declaration order.

    • At any stage of the proceedings, when the payment or payment in full of the recognised claims or the full satisfaction of the creditors by any other means is made or ascertained.

    • At any stage of the proceedings, after the end of the common phase of the insolvency proceedings, when the decision accepting the withdrawal or waiver of all recognised creditors has become final.

Finally, it should be noted that the Tax Agency has added a Calculator for TB modification deadlines and other rectifications to its website, where the deadline for modifying output VAT can be consulted when the circumstances provided for in Article 80 of the VAT Law or an error occurs.It also provides the period and financial year of form 303 in which the corresponding adjustment is made: