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The Registry of Extractors of Tax Warehouses

On Wednesday, 5 April, Royal Decree 249/2023, which amends the General Regulations on tax management and inspection activities and procedures and on the implementation of the common rules for tax application procedures, was published in the Official State Gazette.

This amendment, which came into force on 25 April of this year, created the REDEF (Registry of Extractors of Tax Warehouses) and initiated the application of the subsidiary liability set out in section five of the annex to Law 37/1992, on Value Added Tax, for tax warehouse operators, in relation to certain products included in the target scope of certain special taxes applicable to items extracted from these warehouses. It was Law 11/2021 of 9 July, on measures to prevent and combat tax fraud, that established this liability, but conditioned on the existence of the registry that now exists. Tax warehouses are thus more involved in the payment of taxes that are levied upon certain products when they leave these warehouses, beyond Special Taxes, although said liability will not apply when the extractors are registered in the REDEF, which requires an express concession agreement from the Tax Agency, upon request by the interested party.

This liability of the warehouse operator and the associated need for the extractor to register in the REDEF applies to all products subject to the Hydrocarbon Tax, while in the case of alcoholic beverages, it only affects those that are subject to the Tax on Alcohol and Alcoholic Beverages. It is important to note that the registry is defined for the extractors of these products, not for the extractors of any other products that may pass through a tax warehouse, which are not required to register. According to the above, there are two independent registration options: REDEF hydrocarbons and REDEF alcohol.

The implementation of this Registry has required a modification to the census declaration to allow extractors to request to register and de-register through Ministerial Order HFP/381/2023 of 18 April. It is therefore the extractors themselves who must request to register. The Tax Agency will then, after a series of checks typically carried out by the Inspectorate, approve the registration with effect from the day following the agreement. There is an online query available for tax warehouses that provides reliable information in real time on whether a certain subject is registered or not. A specific section has also been set up on the AEAT website with regulations, FAQs, technical specifications, etc.

To enable the implementation of REDEF, the regulation specified that some extractors would be automatically registered ex officio. These are primarily wholesale operators registered on the list of the Ministry for the Ecological Transition and the Demographic Challenge (for hydrocarbons), and extractors listed in a form 548 from 2022 (for alcohol).

In the business chain involved in the markets of the aforementioned products, the extractor holds a critical position in terms of VAT . While the economic agents ahead of it buy and sell inside the warehouse (without VAT) and the ones after it buy and sell outside the warehouse (with VAT), the extractor buys without VAT and sells with VAT, so it is responsible for depositing a very significant portion of the final tax that will be levied on the product during all its phases. Fraud schemes take advantage of this to lower prices by omitting the payment of this VAT, with problematic effects on the competition. The main goal of the reform and registration is to prevent this type of fraud.

It is also important to know what a registry of “extractors” is in the precise sense defined by the Royal Decree, meaning that other subjects that operate in these markets that do not specifically have the role of extractor will not be registered.

When the regulation relating to the Registry went into effect, an enormous number of requests was received in just a few days. To comply with the function of overseeing the registry, all registration requests submitted using form 036 began to be analysed in detail, and verification actions are carried out in those cases in which circumstances make it advisable, including travel and visits to the facilities, analysis of documentation and background, etc. The need to register is also verified by analysing whether the products extracted are regulated by the Royal Decree, and determining that the role of the subject is effectively that of extractor; if not, registration is denied.

Hundreds of declarations have been analysed and processed, and subjects that exhibited clear signs of tax risk have been excluded from the Registry, as have special-purpose entities through which the fraud was intended to be channelled.

Once the initial impact of the large number of registration applications was absorbed following the entry into force of the Registry, the census control tasks for the subjects that registered were also initiated ex officio. Likewise, the first VAT checks of non-registered extractors have begun to be carried out for those periods in which the REDEF was already in force. This was done to hold tax warehouse operators liable in the event of non-compliance.

The goal is to have a limited census that can be supervised, that offers information at an early stage, and that avoids the enormous damage that organised criminal networks cause and that are difficult to prosecute given their enormous complexity. The result is a reinforced capacity to respond to this type of fraud.

After a few months of operation, REDEF can be considered an effective tool in the fight against VAT fraud in the alcohol and hydrocarbon sectors.