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Consequences of Brexit on VAT from 1 January 2021

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VAT refund for entrepreneurs based in the United Kingdom

Entrepreneurs established in the United Kingdom and not established in Spain or in the Community who acquire goods and services in the territory of application of Spanish VAT (Peninsula and Balearic Islands) and wish to request a refund of the input VAT, will no longer be able to submit their request by electronically, in accordance with Council Directive 2008/9/EC, and will have to do so in accordance with Council Directive 86/560/EEC.

The applicant will need to appoint a representative who is a resident in the territory of application of Spanish VAT, and there will need to be reciprocity in the United Kingdom with Spanish companies, except for in the following cases:

  1. Templates, moulds and equipment acquired or imported to be used in the manufacture of goods that are exported to the non-established employer or professional or destroyed.
  2. Access, hospitality, catering and transport services related to attendance at trade fairs, congresses and exhibitions of a commercial or professional nature held in the territory of application of the Tax (Peninsula and Balearic Islands).
  3. Good and services used for the provision of telecommunications, broadcasting and television or electronic services, by businesses applying the MOSS.

According to the Resolution of January 4, 2021 of the General Directorate of Taxes, there is reciprocity of treatment in the United Kingdom , without the employer having to provide documentation to justify it. However, it should be noted that the United Kingdom does not return the fees incurred or paid:

  1. For goods and services acquired that do not affect business or professional activity

  2. For goods and services intended for resale.

  3. For goods and services relating to shows or recreational services.

  4. For the acquisition of a motor vehicle.

  5. 50% of the VAT incurred on the rental or leasing of a motor vehicle.

Therefore, the refund of VAT contributions paid in Spain will not be applicable in these cases either.　

Entrepreneurs established in Northern Ireland and not established in Spain or the Community may continue to submit their refund request electronically, in accordance with Council Directive 2008/9/EC, but only with respect to the VAT amounts incurred on the acquisition or import of goods in the Peninsula and the Balearic Islands. The refund of the fees paid for services located in the territory of application of Spanish VAT will be requested according to the procedure provided for in Council Directive 86/560/EEC.

In the case of input VAT paid before January 1, 2021 the requirement of reciprocity, the obligation to appoint a representative, or certain additional limitations and conditions will not apply. Notwithstanding, the Administration may require the applicant to prove their taxpayer status for this tax and provide invoices. Applications must be submitted by April 1, 2021.

Refund applications for VAT borne in the territory of application of the Spanish tax for Businesspersons or Professionals Established in third countries with which there is or is not a reciprocity agreement for certain goods and services.

Regulations:

  • Law 37/1992 on Value Added Tax: article 119 bis (as laid out in Law 28/2014 of 27 November - Official State Gazette of 28)

  • R.D. 1624/1992, VAT regulation: article 31 bis

These refund requests fall within the procedure established in Directive 86/560/EEC of 17 November 1986 of the Council of the European Communities.

Therefore, refund applications for VAT paid in Spain shall continue to be filed directly in the Member State of Refund - in this case, Spain -.

As of 1st January 2010, all requests must be submitted electronically.

It is a prior mandatory requirement that applicants designate a representative established within the territory where the tax applies, who shall fulfil the corresponding formal or procedural obligations and shall be jointly and severally liable in cases of undue refunds. This representative shall be responsible for electronically filing the refund application.

Prior to submission, the following documents must be sent to the National Tax Management Office (Paseo de la Castellana, nº 147, bajo, CP: 28046 MADRID), by registered post:

  1. A certificate issued by the relevant authorities in the Country where the taxpayer is established, stating that business or professional activities subject to Value Added Tax or an equivalent tax have been carried out in that Country during the period that the request pertains to.

  2. Original power of representation granted before a notary public in favor of a representative who is a resident, which must expressly state the capacity of the grantor to act on behalf of and represent the person or entity represented, the place and date on which said power is granted, the name and surname or company name, address and tax identification number of the businessman or professional granting the power, the identifying data and address of the representative, as well as the powers conferred by said power, among which the power conferred to him to submit form 361 by electronic means must be expressly stated. If the representative also wishes to be approved to receive Value Added Tax refunds in his or her name on behalf of the requestor, this must be expressly stated in the power of attorney. The power of attorney must be drafted wholly in Spanish or translated by a sworn interpreter or translator. If the Notary Public is not Spanish, the power of attorney must carry the Hague Apostille. In the event that the Notary's country of residence has not subscribed to the Hague Convention, it must be duly legalised.

From 1 January 2015 a reciprocity treatment agreement is not required in the country in which the employer or professional applicant is based, in relation to the goods and services that are indicated below:

  1. Templates, moulds and equipment acquired or imported to be used in the manufacture of goods that are exported to the non-established employer or professional or destroyed.

  2. Access, hospitality, catering and transport services related to attendance at trade fairs, congresses and exhibitions of a commercial or professional nature held in the territory of application of the Tax (Peninsula and Balearic Islands).

  3. Employers or professionals not established in the Community that register for the applicable special regime for telecommunications, broadcasting or television services and services provided electronically, will be entitled to the refund of the VAT fees borne by the acquisition or import of goods and services that must be considered carried out in the territory in which the tax is applied, provided that these goods and services are allocated to the provision of telecommunications, broadcasting or television services and electronic services.