Correct application of VAT on purchases within the EC made by persons subject to the special equivalence surcharge scheme

Report. A/4/59/15

REPORT

This Sub-directorate has been asked what should be the appropriate treatment for the purposes of Value Added Tax of intra-community acquisitions made by taxpayers covered by the special regime of the equivalence surcharge when they fail to comply with the obligation to register in the ROI.

Broad outline of the Special Equivalence Surcharge Scheme in VAT

The special equivalence surcharge scheme is regulated in Articles 148 to 163 of the Value Added Tax Act 37/1992 of 28 December (hereinafter LIVA) and 59 to 61 of Royal Decree 1624/92 of December 29 passing the Regulations of the Tax. These rules are based on Article 281 of Directive 2006/112/EC.

The object of this special scheme is to simplify procedures for the taxpayer ascribed to it insofar as it is not obliged, except for certain cases which will be explained below, to submit self-assessments for the Tax.

The rule configures it as a MANDATORY regime , not subject to waiver, applicable exclusively to retail traders (article 149 LIVA), which implies that in purchases, the retailers' suppliers pass on to them and are obliged to pay the equivalence surcharge, in addition to the VAT.

In their commercial operations, as well as in the transfers of goods or rights used exclusively in said activity, these subjects must charge the VAT to their clients, but not the surcharge. However, is not required to record these transferred quotas in a self-assessment or to pay the tax , with the exception of the deliveries of taxable and non-exempt real estate, for which the transferor must transfer, liquidate and pay the accrued tax quotas.

These taxable persons cannot deduct the input VAT for the acquisition or import of goods of any nature or for the services that have been provided to them to the extent that said goods or services are used in carrying out the activities affected by this special regime (Art 154. Two 2 paragraph LIVA).

When the retailer under the equivalence surcharge regime makes intra-community acquisitions, imports and acquisitions of goods in which the retailer is a taxable person, the latter is obliged to settle and pay the tax and the surcharge .

Intracommunity acquisitions of goods (IAGs) made by taxpayers subject to the special equivalence surcharge scheme.

Taxpayers subject to this special scheme are obliged to settle the tax in the event of carrying out IAG, since they are the passive subjects of these operations.

To these purposes, the retailer must file a special self-assessment of a non-periodical nature for the IAGs via form 309, not being entitled to deduct the VAT borne.

To carry out intra-community operations, it is necessary to request from the Tax Administration the assignment of the corresponding Community NIF/VAT and its inclusion in the register of intra-community operators (ROI) by means of a declaration (form 036) .

In turn, the correct application of the tax payment in VAT of intracommunity operations requires the existence of adequate information exchange between Member States. For Spanish employers and professionals, it entails the presentation of the summary declaration of intracommunity operations (form 349), declaring deliveries and acquisitions of goods and provisions of services, and this must be submitted by all entrepreneurs or professionals who carry out IDGs or IAGs, whatever their tax payment scheme for the purposes of VAT.

Cases in which IAGs are made by the passive subject ascribed to the Special Equivalence Surcharge Scheme without having requested ID/VAT number and inclusion in the ROI.

It must then be analysed what are the consequences when a passive subject ascribed to the special equivalence surcharge scheme has not requested the allocation of an ID/VAT number or inclusion in the ROI for the purposes of the location of the IAGs which it carries out.

Art. 13 of the LIVA provides that intra-Community acquisitions of goods out for valuable consideration by businesspeople, professionals or legal entities that do not act as such and said operations are considered to be carried out within the spatial scope of the Tax will be subject to the Tax.

According to this provision, one of the elements that delimit the taxable event AIB is the condition of the purchaser as a businessman or professional , regardless of being subject to the general regime or to some of the special regimes of the Tax. And it is this element and the proof of such condition that is the controversial issue.

The general tax system applicable to AIBs that take place in the TAI consists of considering the existence of an exempt delivery in the MS of departure of the good and a taxable event, AIB in the TAI, under certain requirements, since for the seller of the other State to consider the operation exempt there, the Spanish businessman who acquires, must communicate the NIF (Art. 15 and 25 LIVA).

It can be advanced that the confirmation on the validity of a VAT number and of its attribution to a certain individual is one of the elements of proof which support the exemption of intracommunity deliveries of goods, but that it does not have to condition the exemption of the IDG.

In this regard, it is necessary to refer to several judgments of the CJEU which were issued in relation with the exemption of IDGs (JCJEU 6-9-2012, As C-273/11, and of 27-9-12, As C—587/10). In particular, in the judgment Vogtländische Strassen-, Tief- und Rohrleitungsbau GmbH Rodewisch, C-587/10 of 27 September 2012, the CJEU was asked if the exemption of the IDG can be conditional on the supplier providing the VAT Code of the buyer in another Community State.

Focusing on the issue of the VAT NIF, the CJEU indicated that it cannot be questioned that said identification number is closely related to the condition of VAT taxpayer – businessman or professional. However, cannot deny such condition due to the lack of said number , since the definition of the same is not conditioned by this circumstance.

The aforementioned jurisprudence emphasises that a passive subject acts as such when it carries out operations within the framework of its taxable activity. It cannot be ruled out that a supplier does not have the above-mentioned number, all the more so when the fulfillment of such obligation depends on the information received from the buyer (Section 50).

Finally, it is concluded in sections 51 and 52 that although the identification number for VAT purposes accredits the tax status of the taxable person and facilitates the tax control of intra-community operations , however, this is a mere formal requirement , which cannot call into question the right to VAT exemption if the material requirements are met. of intra-community delivery.

As a result, although it is legitimate to demand that the supplier act in good faith and take all reasonable measures within its power to ensure that the operation does not lead it to participate in a tax fraud, the Member States go beyond the strictly necessary measures for the correct collection of the tax if they declare that an IDG may not have recourse to exemption due to the mere fact of not providing the Identification Number, but on the other hand indications are given which serve to provide sufficient proof that the buyer is a passive subject who acts as such in the operation in question.

Therefore, insofar as a retailer carries out an IAG without having requested the Community ID/VAT number, provided that it manifests its condition of passive subject through other indications, it is carrying out an IAG located in the TAT, the retailer being obliged to submit form 309, declaring and depositing the VAT and the equivalence surcharge, not being entitled to deduct the tax liabilities borne.

In the case of Spanish regulations, we must not forget that the retailer is subject to mandatory special regime in which the supplier requires the retailer pay a surcharge together with the tax charged in their self-assessments. Under this scheme, what the supplier earns through VAT and equivalence surcharge is an approximation of what they would earn through VAT if both the supplier and the retailer were under the general regime.

Conditioning the location of the IAG in the TAT on the mere communication or application of the Community ID/VAT number would involve, on one hand, rendering ineffective the compulsory nature of the special scheme, in depending on whether or not the Community ID/VAT number has been requested, since in the event of not having communicated the ID/VAT number, and if it is understood that the IAG is not located in the TAT, the VAT and the surcharge would no longer be deposited, which we reiterate is compulsory for the retailer in cases of IAG, and on the other hand the VAT would no longer be deposited in the last link of the chain, the operation being taxed as an IDG at source, without generating the deposit of the tax liabilities passed on by the retailer to its clients, and, in addition, taking advantage of possible lower rates existing in the country of exit of the goods compared with those of application in the State of consumption of the goods.

It is clear that the confirmation of the validity of a VAT number and of its attribution to a particular passive subject is one of the elements of proof which support the exemption of IDGs, but, as is stated in the above-mentioned judgment, it is a mere formal demand which cannot condition the exemption of IDGs made by suppliers of other Member States to the retailer domiciled in the TAT when, even if the buyer has not provided a Community ID/VAT number, its condition of passive subject is confirmed by the information provided by it.

In this case, there is an AIB located in the TAI and correspondingly an exempt EIB in the country of departure of the goods, the retailer having the obligation to present form 309 declaring this intra-community operation and paying the VAT. plus the equivalence surcharge .

Madrid, 30 October 2015.