Practical example

Mr. "X" has carried out the following economic activities during the year 2022:

It manufactures stoves, mixers, coffee makers, vacuum cleaners, refrigerators, dryers, fans, washing machines, etc. This activity is included in section 345.1 of the Tax on Economic Activities ("manufacturing of household appliances").
He has an agricultural holding for which he has not renounced the special regime for agriculture, livestock and fishing.

Taxation by Value Added Tax:

For the manufacture of household appliances, you are taxed under the general tax regime.
For agricultural exploitation, you are taxed under the special regime for agriculture, livestock and fishing, which means that for this activity you do not present self-assessments, obtaining the corresponding flat-rate compensation each time you sell.

The activities carried out constitute two differentiated sectors of activity, so the deduction regime is applied independently in each of them. If there is an acquisition that affects several of these regimes, the pro rata will be applicable to determine what part of the input VAT is deductible, taking into account, for these purposes, that the operations carried out in the special regime does not give the right to deduct.

The operations described in the scenario occur exclusively in the activity of manufacturing household appliances.

The global volume of operations in 2021 was 300,000 euros.

The declaration for the 4th quarter of 2021 resulted in compensation of 3,000 euros.

In operations, we will assume that the tax is not included in the price unless, by legal precept, it must be understood otherwise or otherwise expressly indicated.

First quarter operations

(1) Purchase engines from a Spanish businessman for 36,000 euros.

HI: delivery of goods made by a businessman
Input VAT: (36,000 x 21%): 7,560 euros

(2) Purchases sheet metal from a German manufacturer for 18,000 euros.

HI: intra-community acquisition of goods
VAT accrued and supported: (18,000 x 21%): 3,780 euros

(3) Receives services from a lawyer for 6,000 euros.

HI: provision of services carried out by a professional
Input VAT: (6,000 x 21%): 1,260 euros

(4) Receives the invoice for the transportation carried out by a German carrier for the transfer of the goods in point (2) whose amount amounts to 3,000 euros.

HI: provision of services carried out by an entrepreneur
The service is understood to be carried out entirely in the territory of application of the tax as it is an intra-community transport of goods whose recipient is a businessman or professional.

The reversal of the taxable subject occurs because the provider is not established.
VAT accrued and supported: (3,000 x 21%): 630 euros

(5) Pay 5,000 euros for rent of the premises where you carry out your activity.

HI: provision of services carried out by an entrepreneur
Input VAT: (5,000 x 21%): 1,050 euros

(6) Purchase screws in Morocco for 12,000 euros.

HI: import
The VAT accrued is paid at customs, so it only appears as input VAT on the self-assessment. You cannot opt for deferral.
Input VAT: (12,000 x 21%): 2,520 euros

(7) Sells household appliances to a wholesaler for an amount of 55,000 euros.

HI: delivery of goods made by a businessman
VAT accrued: (55,000 x 21%): 11,550 euros

(8) Invoice for assembly and arrangements in sales made to individuals 4,000 euros.

HI: provision of services carried out by an entrepreneur
VAT accrued: (4,000 x 21%): 840 euros

(9) Sells household appliances to merchants under the special equivalence surcharge regime for 24,000 euros.

HI: delivery of goods made by a businessman
Because the recipient is subject to an equivalence surcharge, he must charge the VAT and the surcharge on the same basis.
VAT accrued: (24,000 x 21%): 5,040 euros
Equivalence surcharge: (24,000 x 5.2%): 1,248 euros

(10) Sell household appliances in Morocco for 12,000 euros.

HI: delivery of goods made by a businessman
The delivery will be exempt because the goods are dispatched or transported outside the Community by the transferor, that is, it is an export.

First quarter settlement

VAT ACCRUED

General scheme

Internal sales: [(55,000⁽⁷⁾ +24,000⁽⁹⁾)] x 21%: 16,590 euros
Services provided: (4,000⁽⁸⁾x 21%): 840 euros
Total VAT accrued on domestic sales and services provided (83,000 x 21%): 17,430 euros
Equivalence surcharge: (24,000⁽⁹⁾x 5.2%): 1,248 euros
Intra-community acquisitions: [(18,000⁽²⁾ +3,000⁽⁴⁾)] x 21%: 4,410 euros
TOTAL FEE ACCRUED: 23,088 euros

TAX-DEDUCTIBLE

For quotas supported in internal operations

Buy interiors: (36,000⁽¹⁾ x 21%): 7,560 euros

Services received: [(6,000⁽³⁾ +5,000⁽⁵⁾) x 21%]: 2,310 euros

Total quotas supported in internal operations: 9,870 euros

For quotas paid on imports: (12,000⁽⁶⁾ x 21%): 2,520 euros

In intra-community acquisitions: [18,000⁽²⁾ +3,000⁽⁴⁾) x 21%]: 4,410 euros

TOTAL TO DEDUCT: 16,800 euros

Difference: 6,288 euros

Fee to be offset from previous periods: 3,000 euros, of which we apply 3,000 euros to this quarter

Difference to enter: 3,288 euros

Other data to consider for the annual summary declaration

For the purposes of recording the operations carried out under the general regime (box 99 of form 390), these operations have amounted to 83,000 euros (from the tax base of the VAT accrued (104,000) the intra-community acquisitions of goods and services (21,000) because they are not operations carried out but received, it must also be taken into account that the tax base on which the equivalence surcharge is also applied must not be added twice).
Exports for the quarter amount to 12,000 euros.
The agricultural sales made and documented in the quarter amounted to 15,000 euros plus 12% compensation: 16,800 euros.

Second quarter operations

(11) Purchase pieces in Japan for an amount of 36,000 euros.

HI: import of goods
Input VAT: (36,000 x 21%): 7,560 euros

(12) Sells appliances to wholesalers for 70,000 euros, a discount of 3,000 euros is agreed given the amount of the order.

HI: deliveries of goods made by a businessman
The discounts granted at the time of carrying out the operation and based on it are not included in the consideration that constitutes the taxable base of the tax.
VAT accrued: (67,000 x 21%): 14,070 euros

(13) They provide you with a machinery repair service for 30,000 euros. Payment is pending, but you have already received the invoice. For the deferral of payment they charge you more than 600 euros of interest included in the invoice.

HI: provision of services carried out by an entrepreneur
The time of payment is irrelevant as long as it is after accrual.

Interest is not included in the tax base as it is after accrual, is usual in the market and is recorded separately on the invoice.
Input VAT: (30,000 x 21%): 6,300 euros

(14) Sells household appliances to merchants at an equivalence surcharge for 12,000 euros.

HI: delivery of goods made by a businessman
VAT accrued: (12,000 x 21%): 2,520 euros
Equivalence surcharge: (12,000 x 5.2%): 624 euros

(15) Purchase manufacturing machinery for 1,800 euros.

HI: delivery of goods made by a businessman
In no case will it be considered an investment good as it is less than 3,005.06 euros.
Input VAT: (1,800 x 21%): 378 euros

(16) Receives services from a lawyer established in France for 3,000 euros.

HI: provision of services carried out by a professional
The operation is understood to be carried out in the territory of application of Spanish VAT because the recipient has the status of businessman or professional and the headquarters of his activity is in said territory.

The reversal of the taxable person occurs because the provider is not established
VAT accrued and supported: (3,000 x 21%): 630 euros

(17) Sell products to a Japanese businessman for 9,000 euros. The availability is made in Japan.

HI: delivery of goods made by a businessman
Exempt operation due to the goods being dispatched or transported outside the European Union by the transferor.

(18) Pay a Spanish carrier 1,200 euros.

HI: provision of services carried out by an entrepreneur
Input VAT: (1,200 x 21%): 252 euros

(19) Purchase pieces in Holland for an amount of 18,000 euros.

HI: intra-community acquisition of goods
VAT accrued and supported: (18,000 x 21%): 3,780 euros

(20) Receives advances from clients of 6,000 euros.

HI: delivery of goods made by a businessman
The collection of advance payments implies the accrual of VAT.
VAT accrued: (6,000 x 21%): 1,260 euros

(21) Performs repairs worth 6,000 euros on the appliances that have been sold.

HI: provision of services carried out by an entrepreneur
VAT accrued: (6,000 x 21%): 1,260 euros

(22) Purchase manufacturing machinery for an amount of 5,100 euros, obtaining a discount for prompt payment included in the invoice of 100 euros.

HI: delivery of goods made by a businessman
Discounts granted at the time the operation is carried out and based on it are not included in the tax base.
Input VAT: (5,000 x 21%): 1,050 euros

(23) Sells products to a French merchant for 12,000 euros.

HI: delivery of goods made by a businessman
Exempt operation because the assets are destined for another Member State.

(24) They provide repair services for certain investment assets worth 24,000 euros.

HI: provision of services carried out by an entrepreneur
It is not considered an investment good because they are executions of work for the repair of investment goods.
Input VAT: (24,000 x 21%): 5,040 euros

(25) Return defective products purchased in point (19) to Holland for 6,000 euros.

The rectification of the VAT accrued and input takes place.
VAT accrued and supported: (-6,000 x 21%): -1,260 euros

(26) Win a public tender to install appliances. Delivery will be made in the month of November. Award amount: 108,900 euros.

HI: delivery of goods made by a businessman
Accrual: when the assets are made available in the month of November.

In the economic proposal, the tax is understood to be included in all cases.
Taxable base: (108,900 ÷ 1.21): 90,000 euros
VAT: (90,000 x 21%): 18,900 euros

(27) Of the sales made in the second half of 2022 one of them has been resolved for an amount of 7,260 euros, VAT included, resulting in the return of the goods.

The accrued VAT is rectified.
Taxable base: (7,260 ÷ 1.21): 6,000 euros
VAT accrued: (-6,000 x 21%): -1,260 euros

Second quarter settlement

VAT ACCRUED

General scheme

Internal sales: [(67,000⁽¹²⁾ +12,000⁽¹⁴⁾ +6,000^(twenty)) x 21%]: 17,850 euros

Services provided: 6,000^(twenty-one)x 21%: 1,260 euros
Total VAT Accrued on domestic sales and services provided (91,000 x 21%): 19,110 euros

Intra-community acquisitions: [(3,000⁽¹⁶⁾ +18,000⁽¹⁹⁾) x 21%]: 4,410 euros
Equivalence surcharge: (12,000⁽¹⁴⁾x 5.2%): 624 euros
Rectification of VAT accrued [(-6,000⁽²⁷⁾ - 6,000⁽²⁵⁾) x 21%]: -2,520 euros
TOTAL FEE ACCRUED: 21,624 euros

TAX-DEDUCTIBLE

For quotas supported in internal operations

Domestic purchases: [(1,800^(fifteen) +5,000⁽²²⁾) x 21%]: 1,428 euros

Services received: [(30,000⁽¹³⁾ +1,200⁽¹⁸⁾ +24,000⁽²⁴⁾) x 21%]: 11,592 euros

Total quotas supported in internal operations: 13,020 euros

For quotas paid on imports: (36,000^(eleven) x 21%): 7,560 euros

In intra-community acquisitions: [(3,000⁽¹⁶⁾ +18,000^{(19) and}⁽²⁵⁾) x 21%]: 4,410 euros

Rectification of deductions: (-6,000⁽²⁵⁾ x 21%): -1,260 euros

TOTAL TO DEDUCT: 23,730 euros

Difference to compensate: -2,106 euros

Other data to consider for the annual summary declaration

The operations carried out under the general regime (box 99 of form 390) have amounted to 91,000 euros [from the taxable base of the VAT accrued (100,000 euros) intra-community acquisitions of goods and services (-21,000 euros) because they are not operations carried out but received and the reductions made must be added (+12,000 euros), in addition it must be taken into account that the tax base on which the surcharge is also applied must not be added twice. equivalence].
Exports for the quarter amounted to 9,000 euros.
Exempt intra-community deliveries have amounted to 12,000 euros.
The agricultural sales made and documented in the quarter amounted to 11,000 euros plus 12% compensation: 12,320 euros.
Within the input VAT, the purchase of point (22) (5,000 x 21%) = 1,050 euros corresponds to investment goods.

Third quarter operations

(28) Free delivery of appliances worth 6,000 euros.

HI: delivery of goods made by a businessman (self-consumption)
The tax base is made up of the cost of the goods.
VAT accrued: (6,000 x 21%): 1,260 euros

(29) Engine purchases for 18,000 euros, do not receive the invoice until the fourth quarter.

HI: delivery of goods made by a businessman
VAT will be deductible when you receive the invoice.

(30) Sell an appliance to an individual for 3,000 euros.

HI: delivery of goods made by a businessman
VAT accrued: (3,000 x 21%): 630 euros

(31) Imports sheet metal from a manufacturer for 6,000 euros.

HI: import of goods
Deductible input VAT: (6,000 x 21%): 1,260 euros

(32) Sells to merchants under the special equivalence surcharge regime for 24,000 euros.

HI: delivery of goods made by a businessman
VAT accrued: (24,000 x 21%): 5,040 euros
Equivalence surcharge: (24,000 x 5.2%): 1,248 euros

(33) Sells household appliances to businessmen for 41,000 euros. The invoice includes 500 euros for transportation and another 500 euros for insurance.

HI: delivery of goods made by a businessman
The tax base includes any effective credit in favor of the person making the delivery.
VAT accrued: (42,000 x 21%): 8,820 euros

(34) Purchase goods to give as gifts to clients for 1,200 euros.

HI: delivery of goods made by a businessman
Fees incurred as a result of the acquisition of goods and services intended for customer service are not deductible.

(35) Sells goods to an Italian individual for 1,200 euros.

HI: delivery of goods made by a businessman
It is not an exempt intra-community delivery because the recipient is a private natural person.
VAT accrued: (1,200 x 21%): 252 euros

(36) Makes an intra-community acquisition from Belgium of current goods for 12,000 euros.

HI: intra-community acquisition of goods
Output and input VAT: (12,000 x 21%): 2,520 euros

(37) On September 30, he sells household appliances to a French company for 18,000 euros. The goods do not leave the territory.

HI: delivery of goods made by a businessman
The operation is not exempt because the goods do not leave the territory and it is an essential requirement for it to be an exempt intra-community delivery.
VAT accrued: (18,000 x 21%): 3,780 euros

(38) Return of merchandise sold this year in Spain for 6,000 euros.

VAT accrued: (-6,000 x 21%): -1,260 euros

(39) You have expenses for participating in an exhibition in the amount of 1,200 euros.

HI: provision of services carried out by an entrepreneur
Input VAT: (1,200 x 21%): 252 euros

(40) The insurance company that insured the operation of point (33) invoices you 500 euros.

HI: provision of services carried out by an entrepreneur
The operation is exempt from tax.

Third quarter settlement

VAT ACCRUED

General scheme

Internal sales: [(6,000⁽²⁸⁾+3,000⁽³⁰⁾ +24,000⁽³²⁾ +42,000^{( 33)} +1,200⁽³⁵⁾) x 21%] + [18,000⁽³⁷⁾ x 21%]: 19,782 euros
Sales return: (-6,000⁽³⁸⁾ x 21%): -1,260 euros
Equivalence surcharge: (24,000⁽³²⁾x 5.2%): 1,248 euros
Intra-community acquisitions: (12,000⁽³⁶⁾x 21%): 2,520 euros
TOTAL FEE ACCRUED: 22,290 euros

TAX-DEDUCTIBLE

For quotas supported in internal operations

Services received: (1,200⁽³⁹⁾ x 21%): 252 euros

For quotas paid on imports: (6,000⁽³¹⁾ x 21%): 1,260 euros

In intra-community acquisitions: (12,000⁽³⁶⁾x 21%): 2,520 euros

TOTAL TO DEDUCT: 4,032 euros

Difference: 18,258 euros

Fee to be offset from previous periods: -2,106 euros that do not apply to this quarter

Difference to enter: 18,258

Other data to consider for the annual summary declaration

The operations carried out under the general regime (box 99 of form 390) have amounted to 88,200 euros [from the taxable base of the VAT accrued (100,200 euros) intra-community acquisitions of goods must be deducted (- 12,000 euros) because they are not operations carried out but received. The reduction made does not have to be added because it belongs to the same year. Furthermore, it must be taken into account that the tax base on which the equivalence surcharge is also applied should not be added twice].
Agricultural sales made and documented in the quarter amounted to 7,300 plus 12% compensation: 8,176 euros.

Fourth quarter operations

(41) Purchase of parts for 60,000 euros. They pass on 10% instead of 21%.

HI: delivery of goods made by a businessman
You cannot deduct more than what has been passed on to you.
Input VAT: (60,000 x 10%): 6,000 euros

(42) Send an advance payment to a Spanish supplier for 12,000 euros.

HI: delivery of goods made by a businessman
Advance payments represent the accrual of the tax.
Input VAT: (12,000 x 21%): 2,520 euros

(43) Obtain discounts for purchases in the first half of the year for an amount of 18,000 euros

Input VAT: (-18,000 x 21%): -3,780 euros

(44) Receive pending invoices for the third quarter for 18,000 euros

Input VAT: (18,000 x 21%): 3,780 euros

(45) Sells household appliances to retailers at an equivalence surcharge for 12,000 euros.

HI: delivery of goods made by a businessman
Output VAT: (12,000 x 21%): 2,520 euros
Equivalence surcharge: (12,000 x 5.2%): 624 euros

(46) The goods from point (30) are returned, rendering the operation void.

Output VAT: (-3,000 x 21%): -630 euros

(47) Send an advance payment to an Italian supplier for 6,000 euros.

Advances on intra-community acquisitions do not accrue VAT.

(48) Exports for 12,000 euros.

HI: delivery of goods made by a businessman
It is a tax-exempt delivery.

(49) The transaction carried out with the city council in the second quarter is accrued (point 26).

VAT accrued: (90,000 x 21%): 18,900 euros

(50) Purchase an apartment from an individual for 90,000 euros to use as an office.

Delivery of goods not subject to VAT because it is not carried out by a businessman or professional.

(51) Sells the manufacturing license to a Portuguese company.

Provision of services not subject to Spanish VAT because it is not understood to be carried out in the territory.

(52) Sells a warehouse to an individual for 72,000 euros.

HI: delivery of goods made by a businessman
Exempt delivery as it is the second delivery of buildings (without the possibility of waiver).

(53) Purchases engines from Spanish businessmen for an amount of 72,000 euros.

HI: delivery of goods made by a businessman
Input VAT: (72,000 x 21%): 15,120 euros

Fourth quarter settlement

VAT ACCRUED

General scheme

Domestic sales:[(12,000^{(Four. Five)} +90,000⁽⁴⁹⁾)x 21%]: 21,420 euros
Return of goods: -3,000⁽⁴⁶⁾ x 21%: -630 euros
Equivalence surcharge: (12,000^{(Four. Five)}x 5.2%): 624 euros
TOTAL FEE ACCRUED: 21,414 euros

TAX-DEDUCTIBLE

For quotas supported in internal operations

Purchases made: (60,000⁽⁴¹⁾ x 10%): 6,000 euros

[(12,000⁽⁴²⁾ +72,000⁽⁵³⁾) x 21%]: 17,640 euros

Invoices pending receipt: (18,000⁽⁴⁴⁾ x 21%): 3,780 euros

Deduction rectification (-18,000⁽⁴³⁾ x 21%): -3,780 euros

TOTAL TO DEDUCT: 23,640 euros

The fees to be offset from previous periods (2,106 euros) are not applied in this quarter

Difference to compensate: -2,226 euros

Other data to consider for the annual summary declaration

The operations carried out under the general regime (box 99 of form 390) have amounted to 99,000 euros [of the taxable base of the VAT accrued (99,000) the reduction made does not have to be added because it belongs to the same exercise. Furthermore, it must be taken into account that the tax base on which the equivalence surcharge is also applied should not be added twice. Transactions not subject to Spanish VAT (51) are not taken into account; this amount must be entered in box 110].
Agricultural sales have amounted to 24,000 plus 12% compensation: 26,880.
Exempt real estate sales: 72,000.
Exports: 12,000.

(See how the VAT is settled for this practical case in form 303 ).

(See how the VAT is settled for this practical case in form 390 ).