Practical example

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

It manufactures cookers, mixers, coffee machines, hoovers, refrigerators, dryers, fans, washing machines, etc. This activity is included under heading 345.1 of the Economic Activities Tax ("manufacture of electrical household appliances").
He has an agricultural holding for which he has not renounced the special regime for agriculture, livestock farming and fishing.

Taxation by Value Added Tax:

The manufacture of electrical household appliances is taxed under the general tax system.
For farming, he is taxed under the special regime for agriculture, livestock and fishing, which means that he does not file self-assessments for this activity, but receives the corresponding flat-rate compensation each time he sells.

The activities carried out constitute two distinct sectors of activity and therefore the deduction regime applies independently to each of them.If there is an acquisition that affects several of these regimes, the pro rata will be applicable to determine which part of the input VAT is deductible, taking into account, for these purposes, that transactions carried out under the special regime do not give the right to deduct.

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

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

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

In transactions, we shall assume that the tax is not included in the price unless, by legal provision, it is to be understood otherwise or it is expressly stated otherwise.

First quarter operations

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

HI:delivery of goods by an entrepreneur
Input VAT:(36,000 x 21%):7,560 euros

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

HI:intra-Community acquisition of goods
Accrued and input VAT:(18,000 x 21%):3,780 euros

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

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

(4) You receive an invoice from a German carrier for the transport of the goods in (2) amounting to EUR 3,000.

HI:provision of services by an employer
The service is deemed to be carried out entirely within the territory of application of the tax since it is an intra-Community transport of goods for which the recipient is a trader or professional.
There is a reversal of the taxable person because the supplier is not established.
Accrued and input VAT:(3,000 x 21%):630 euros

(5) He pays 5,000 euros for renting the premises where he carries out his activity.

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

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

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

(7) It sells electrical appliances to a wholesaler for 55,000 euros.

HI:delivery of goods by an entrepreneur
VAT due:(55,000 x 21%):11,550 euros

(8) Invoice for assemblies and repairs in sales to private individuals 4,000 euros.

HI:provision of services by an employer
VAT due:(4,000 x 21%):840 euros

(9) He sells electrical appliances to traders under the special equivalence surcharge scheme for 24,000 euros.

HI:delivery of goods by an entrepreneur
As the recipient is subject to the equivalence surcharge, he has to charge VAT and the surcharge on the same basis.
VAT due:(24,000 x 21%):5,040 euros
Equivalence surcharge:(24,000 x 5.2%):1,248 euros

(10) Sells electrical appliances in Morocco for 12,000 euros.

HI:delivery of goods by an entrepreneur
The supply is exempt because the goods are dispatched or transported out of the Community by the transferor, i.e. the supply is an export.

First quarter settlement

VAT DEDUCTED

General scheme

Domestic sales:[(55.000⁽⁷⁾ + 24.000⁽⁹⁾)] x 21%:16,590 euros
Services provided:(4,000⁽⁸⁾x 21%):840 euros
Total VAT due on domestic sales and services rendered (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 ACCRUED CONTRIBUTION:23,088 euros

DEDUCTIBLE VAT

For input tax on domestic transactions

Interior shopping:(36,000⁽¹⁾ x 21%):7,560 euros

Services received:[(6.000⁽³⁾ + 5.000⁽⁵⁾) x 21%]:2,310 euros

Total input tax on domestic transactions: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 BE DEDUCTED: 16,800 euros

Difference:6,288 euros

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

Difference to be paid:3,288 euros

Other information to be considered for the annual summary declaration

83,000 (from the taxable base of the VAT accrued (104,000), intra-Community acquisitions of goods and services (21,000) must be deducted because they are not transactions carried out but received, and it must also be borne in mind that the taxable base on which the equivalence surcharge is also applied must not be added twice).
Exports for the quarter amounted to 12,000 euros.
Agricultural sales made and documented in the quarter amounted to 15,000 euros plus 12% compensation:16,800 euros.

Second quarter operations

(11) Purchase of parts in Japan amounting to 36,000 euros.

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

(12) You sell electrical 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 by an entrepreneur
Discounts granted at the time and on the basis of the transaction are not included in the consideration constituting the taxable amount.
VAT due:(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 deferment of payment they charge more than 600 euros of interest included in the bill.

HI:provision of services by an employer
The time of payment is irrelevant as long as it is after accrual.
Interest is not included in the taxable base as it is paid after the accrual, is normal market interest and is shown separately on the invoice.
Input VAT:(30,000 x 21%):6,300 euros

(14) He sells electrical appliances to traders under the equivalence surcharge for 12,000 euros.

HI:delivery of goods by an entrepreneur
VAT due:(12,000 x 21%):2,520 euros
Equivalence surcharge:(12,000 x 5.2%):624 euros

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

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

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

HI:provision of services by a professional
The transaction is deemed to be carried out in the territory where Spanish VAT applies because the recipient is a trader or professional and has his place of business in that territory.
Reversal of taxable person occurs because the supplier is not established.
Accrued and input VAT:(3,000 x 21%):630 euros

(17) He sells products to a Japanese businessman for 9,000 euros.The provision is made in Japan.

HI:delivery of goods by an entrepreneur
Transaction exempted because the goods are dispatched or transported outside the European Union by the transferor.

(18) Pays a Spanish haulier 1,200 euros.

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

(19) Purchase of parts in the Netherlands for 18,000 euros.

HI:intra-Community acquisition of goods
Accrued and input VAT:(18,000 x 21%):3,780 euros

(20) Receives advance payments from customers of 6,000 euros.

HI:delivery of goods by an entrepreneur
The collection of advance payments results in the accrual of VAT.
VAT due:(6,000 x 21%):1,260 euros

(21) He carries out repairs for 6,000 euros on electrical appliances that he has sold.

HI:provision of services by an employer
VAT due:(6,000 x 21%):1,260 euros

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

HI:delivery of goods by an entrepreneur
Discounts granted at the time and on the basis of the transaction are not included in the taxable amount.
Input VAT:(5,000 x 21%):1,050 euros

(23) He sells goods to a French trader for 12,000 euros.

HI:delivery of goods by an entrepreneur
Transaction exempted because the goods are destined for another Member State.

(24) They provide him with repair services for certain capital goods to the value of 24,000 euros.

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

(25) It returns defective goods purchased under (19) to the Netherlands for 6,000 euros.

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

(26) Wins a public tender to install household appliances.Delivery will take place in November.Award amount:108,900 euros.

HI:delivery of goods by an entrepreneur
Accrual:when the goods are made available in November.
The financial proposal shall in any case include the tax.
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, including VAT, and the goods have been returned.

The accrued VAT is corrected.
Taxable base:(7.260 ÷ 1,21):6,000 euros
VAT due:(-6,000 x 21%):-1,260 euros

Second quarter settlement

VAT DEDUCTED

General scheme

Domestic sales:[(67,000⁽¹²⁾ + 12,000⁽¹⁴⁾ + 6,000⁽²⁰⁾) x 21%]:17,850 euros

Services provided:6.000⁽²¹⁾x 21%:1,260 euros
Total VAT due on domestic sales and services rendered (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 due [(-6.000⁽²⁷⁾ - 6.000⁽²⁵⁾) x 21%]:-2,520 euros
TOTAL ACCRUED CONTRIBUTION:21,624 euros

DEDUCTIBLE VAT

For input tax on domestic transactions

Indoor shopping:[(1,800⁽¹⁵⁾ + 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 input tax on domestic transactions:13,020 euros

For quotas paid on imports:(36,000⁽¹¹⁾ 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 BE DEDUCTED: 23,730 euros

Difference to be compensated:-2,106 euros

Other information to be considered for the annual summary declaration

The transactions carried out under the general system (box 99 of form 390) amounted to 91,000 euros (from the taxable base of VAT accrued (100,000 euros), intra-Community acquisitions of goods and services (-21,000 euros) must be deducted because they are not transactions carried out but received and the reductions made (+12,000 euros) must be added, and it must also be borne in mind that the taxable base on which the equivalence surcharge is also applied must not be added twice).
Exports in the quarter amounted to 9,000 euros.
Exempt intra-Community supplies amounted to 12,000 euros.
Agricultural sales made and documented in the quarter amounted to 11,000 euros plus 12% compensation:12,320 euros.
The purchase of item (22) (5,000 x 21%) = 1,050 euros.

Third quarter operations

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

HI:delivery of goods by an entrepreneur (self-consumption)
The taxable amount is the cost of the goods.
VAT due:(6,000 x 21%):1,260 euros

(29) Purchases of engines for 18,000 euros, does not receive invoice until the fourth quarter.

HI:delivery of goods by an entrepreneur
VAT will be deductible when you receive the invoice.

(30) He sells a household appliance to a private individual for 3,000 euros.

HI:delivery of goods by an entrepreneur
VAT due:(3,000 x 21%):630 euros

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

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

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

HI:delivery of goods by an entrepreneur
VAT due:(24,000 x 21%):5,040 euros
Equivalence surcharge:(24,000 x 5.2%):1,248 euros

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

HI:delivery of goods by an entrepreneur
The taxable amount includes any actual credit in favour of the supplier.
VAT due:(42,000 x 21%):8,820 euros

(34) Purchases goods to give to customers for 1,200 euros.

HI:delivery of goods by an entrepreneur
Taxes borne as a result of purchases of goods and services intended for customer services are not deductible.

(35) He sells goods to an Italian private individual for 1,200 euros.

HI:delivery of goods by an entrepreneur
It is not an exempt intra-Community supply because the recipient is a private individual.
VAT due:(1,200 x 21%):252 euros

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

HI:delivery of goods by an entrepreneur
The transaction is not exempt because the goods do not leave the territory and this is a prerequisite for it to be an exempt intra-Community supply.
VAT due:(18,000 x 21%):3,780 euros

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

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

(39) He has expenses for participating in an exhibition amounting to 1,200 euros.

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

(40) The insurance company that insured the operation in (33) invoices you EUR 500.

HI:provision of services by an employer
The transaction is exempt from tax.

Third quarter settlement

VAT DEDUCTED

General scheme

Domestic 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 returns:(-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 ACCRUED CONTRIBUTION:22,290 euros

DEDUCTIBLE VAT

For input tax on domestic transactions

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 BE DEDUCTED:4,032 euros

Difference:18,258 euros

Quota to be offset from previous periods:-2,106 euros which do not apply to this quarter.

Difference to be paid:18,258

Other information to be considered for the annual summary declaration

The operations carried out under the general regime (box 99 of form 390) amounted to 88,200 euros (from the taxable base of VAT accrued (100,200 euros), intra-Community acquisitions of goods (-12,000 euros) must be deducted because they are not operations carried out but received.The reduction made does not have to be added because it belongs to the same financial year.It should also be borne in mind that the taxable 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.You are charged 10% instead of 21%.

HI:delivery of goods by an entrepreneur
You cannot deduct more than you have been charged.
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 by an entrepreneur
Advance payments are the accrual of tax.
Input VAT:(12,000 x 21%):2,520 euros

(43) Gets discounts for purchases in the first half of the year amounting to 18,000 euros.

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

(44) Receives outstanding invoices for the third quarter amounting to 18,000 euros.

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

(45) Sells electrical appliances to retailers under the equivalence surcharge for 12,000 euros.

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

(46) The return of goods of item (30) takes place and the transaction becomes ineffective.

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 are not subject to VAT.

(48) Exports 12,000 euros.

HI:delivery of goods by an entrepreneur
It is a tax-exempt supply.

(49) The accrual of the transaction with the municipality takes place in the second quarter (point 26).

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

(50) You buy a flat from a private individual for 90,000 euros to use it as an office.

Supply of goods not subject to VAT because it is not made by a trader or professional.

(51) It sells the manufacturing licence to a Portuguese company.

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

(52) He sells a warehouse to a private individual for 72,000 euros.

HI:delivery of goods by an entrepreneur
Delivery exempted as second delivery of buildings (without the possibility of waiver).

(53) Purchase of engines from Spanish entrepreneurs for 72,000 euros.

HI:delivery of goods by an entrepreneur
Input VAT:(72,000 x 21%):15,120 euros

Fourth quarter settlement

VAT DEDUCTED

General scheme

Domestic sales:[(12.000⁽⁴⁵⁾ + 90.000⁽⁴⁹⁾)x 21%]21,420 euros
Return of goods:-3.000⁽⁴⁶⁾ x 21%:-630 euros
Equivalence surcharge:(12,000⁽⁴⁵⁾x 5.2%):624 euros
TOTAL ACCRUED CONTRIBUTION:21,414 euros

DEDUCTIBLE VAT

For input tax on domestic transactions

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

[(12.000⁽⁴²⁾ + 72.000⁽⁵³⁾) x 21%]:17,640 euros

Invoices to be received:(18,000⁽⁴⁴⁾ x 21%):3,780 euros

Rectification deduction (-18.000⁽⁴³⁾ x 21%):-3,780 euros

TOTAL TO BE DEDUCTED: 23,640 euros

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

Difference to be compensated:-2,226 euros

Other information to be considered for the annual summary declaration

The operations carried out under the general system (box 99 of form 390) amounted to 99,000 euros (the reduction made does not have to be added to the taxable base of the VAT accrued (99,000) because it belongs to the same financial year).It should also be borne in mind that the taxable 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 should be entered in box 110].
Agricultural sales accounted for 24,000 plus 12% compensation:26,880.
Exempt real estate sales:72,000.
Exports:12,000.

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

(See how VAT is settled for this case study at form 390).