Tax impact to the recipient

The repercussion involves the transfer of the economic burden of the tax by the taxpayer to the recipient of the taxed transaction.

The repercussion is configured as a right-duty, since the Law establishes that the taxpayer must pass on the amount of the tax to the recipient of the taxed transaction, but at the same time, in order for the recipient to carry out the repercussion, a series of requirements are established in the regulations:

• Formal requirements

  The repercussion must be carried out by means of an invoice, with the exceptions contained in the regulatory rules, recording the repercussed quota separately from the taxable base.

• Temporary requirements

  The repercussion must be made at the time of issuing and delivering the invoice and must be made within one year from the date of accrual. Otherwise, the taxpayer loses the right to pass on the tax (i.e. the taxpayer has paid or must pay the tax, but cannot transfer it to the recipients of the transaction).

• Material requirements

  There is no obligation to bear the impact in two cases:

  1. When the impact is not carried out in accordance with the Law.

  2. When the repercussion occurs before the tax is accrued.

1. Special rule. Impact on public entities

In the case of deliveries of goods and services subject to and not exempt from tax, the recipients of which are public entities, it shall always be understood that the taxpayers of the tax, when formulating their economic proposals, even if verbal, have included the Value Added Tax within them, which, however, must be passed on as a separate item, where appropriate, in the documents presented for collection, without the overall contracted amount experiencing an increase as a result of the allocation of the passed on tax. In this sense, the specific specifications provided for in administrative contracts will contain the express warning that for all purposes the offers of the entrepreneurs will be understood to include not only the contract price, but also the amount of the tax.

2. Rectification of the tax rates passed on

A. Cases in which rectification must be carried out

The correction of the transferred quotas must be carried out in the following cases:

1. In cases where said quotas are set incorrectly.

2. When circumstances occur that give rise to a change in the tax base.

The rectification must be carried out when the causes of the incorrect determination are noted or the circumstances that give rise to the modification of the tax base occur, provided that 4 years have not passed from the moment in which the tax was accrued or from the date on which the circumstances that give rise to the modification of the tax base occurred.

Rectification can be carried out provided that invoice has been issued, even if no fee has been charged.

B. Cases in which rectification is not appropriate

Rectification will not be made in the following cases:

1. When the correction is due to incorrect setting of quotas, it involves an increase in the quotas passed on and the recipients do not act as businessmen or professionals.

   Exception: In cases of legal rate increases, the correction may be made in the month in which the new rates come into force and in the following month.

2. When it is the Tax Administration that reveals, through the corresponding liquidations, accrued and unreturned tax quotas greater than those declared by the taxpayer and it is proven that said taxpayer participated in a fraud or that he knew or should have known, using reasonable diligence for this purpose, that he was carrying out an operation that was part of a fraud.

C. Rectification procedure

We can distinguish:

1. Rectification without requirement that implies increase in fees:

   • Due to well-founded error of law or circumstances that give rise to the modification of the tax base: The difference is included in the declaration-settlement for the period in which the correction must be made.

   • Other causes: A corrective return must be submitted to which the surcharge and late payment interest applicable in accordance with article 27 of Law 58/2003, of December 17, General Tax Law, are applied.

2. Correction that involves reduction in quotas, the taxpayer may choose:

   • Initiate, where appropriate, the self-assessment rectification procedure provided for in article 120.3 of the General Tax Law and in articles 126 to 129 of the RGAT .

   • Regularize the situation in the self-assessment for the period in which the correction must be made or in subsequent periods up to one year from when the correction should have been made. The taxpayer must reimburse the recipient for the amount of the excess instalments passed on.

In cases where the taxed transaction becomes void as a result of the exercise of a bankruptcy reintegration action or other challenge action exercised within the bankruptcy, the taxpayer must proceed to rectify the initially charged amounts in the self-assessment for the period in which the accrued amounts were declared.