12 December 2016 Indirect Tax Alert Spain to require electronic records and submission for VAT books starting July 2017 EY Global Tax Alert Library Access both online and pdf versions of all EY Global Tax Alerts. Copy into your web browser: www.ey.com/taxalerts Executive summary On 6 December 2016, the Spanish Government passed the Royal Decree 596/2016, dated 2 December 2016for the modernization, improvement and promotion of electronic means in the management of value-added tax (VAT), which amends the Spanish VAT Regulation, the Invoicing Regulation and the General Regulation on tax management and inspection procedures. Taxpayers who file VAT returns on a monthly basis will be required to apply this regime as from 1 July 2017, by means of which they will be obliged to electronically keep the Spanish VAT books through this new Immediate Submission of Information (ISI) system. This electronic keeping is achieved through the electronic submission of information of the VAT books, extended for these monthly taxpayers. The ISI will be optional for other taxpayers. This Alert summarizes the main implications of the ISI according to the wording of the final Royal Decree that will need an Order to implement the technical features.
2 Indirect Tax Alert Detailed discussion What is the ISI? Under the new system, the information related to all invoices issued or received, customs documents and accountancy documents, if any, must be transmitted electronically and almost immediately to the Spanish Tax Authorities (the STA), so that the STA have all of the information relating to the operations carried out by VAT taxpayers in real time. The ISI impacts all invoices, either complete or simplified. The ISI aim is to provide the STA with all the relevant information about invoices issued and deductible VAT on invoices received. This information will allow the STA to have a greater control of VAT and the transactions performed, as well as to help taxpayers with the preparation of the VAT returns. Who is obliged under the ISI? The new system will be compulsory for businesses and professionals who are required to file VAT returns on a monthly basis, in other words those who: (i) have revenue exceeding 6 million; (ii) are included in the monthly refund regime; or (iii) who are applying the VAT Grouping provisions. The system can be used by any other business or professional by filing a Census Form whereby they expressly opt to be included in the system. If a business or professional opts to be included in the system they will then file VAT returns on a monthly basis. Enforcement The ISI will be compulsory as of 1 July 2017. However, taxpayers subject to the ISI will have to provide the electronic information about their VAT books corresponding to the period between 1 January 2017 and 30 June 2017 during the period between 1 July and 31 December 2017, so that the complete information should be compiled as from 1 January. VAT books of invoices issued or received The information related to each invoice issued or received must be electronically communicated to the STA within four natural days of the date of its issuance or from the date it was accounted for respectively. For these purposes, Saturdays, Sundays and national holidays are not included (but local and regional holidays are included, in principle). Exceptionally, during the period between 1 July and 31 December 2017, the submission deadline will be eight natural days. In any case relating to invoices issued, the submission must take place before the 16th of the month following the tax point of the operation documented on the invoice, or in the case of invoices received, before the 16th day of the month following the VAT period in which the invoice was registered. In the case of invoices issued by the recipient of the operation or by a third party (self-billing), the deadline for submitting the invoices will be eight natural days (instead of four natural days) with the same limits noted, that is the 16th of the month following the VAT period in which the invoice was registered. Regarding importations of goods, the deadline of four days for the submission of the information is counted from the registration of the single administrative document (SAD). The maximum deadline is extended to the 16th of the month following the end of the VAT period in which the importation amounts have been registered beginning from the day the DUA/SAD is accounted. VAT books relating to investment goods The information must be provided when the VAT return relating to the final VAT period of the year is filed. VAT book of certain intra-eu operations The information should be electronically provided within four days from the moment the transport begins. For these purposes, Saturdays, Sundays and national holidays are not included. Deadlines The new system will affect all of the VAT books required by the VAT Regulation: invoices issued or received, investment goods and other intra-community operations.
Indirect Tax Alert 3 Information to be submitted In addition to the information which must be currently included in the VAT books, the Royal Decree includes additional details which must be provided electronically with every set of information and which go beyond the obligations included in the Spanish Invoicing Regulation: Description of the operations Indication of self-billing invoices, reverse charge or special schemes applicable With respect to amended invoices, the identification of the invoices being amended is required which may be complicated when there is more than one Identification of the invoices that are issued in substitution or exchange of simplified invoices VAT return period in which each invoice was included Identification of complete or simplified invoice Indication of exempt or non-subject transactions performed Reception order is replaced by number and series of the invoices received VAT deductible amount for invoices received For imports of goods, the date of admission in the office and the DUA/SAD1 number assigned Reference, if any, to any invoicing authorization In contrast to the previous draft, the new ISI does allow the submission of the grouped invoice register: Simplified invoices issued for transactions accrued in the same natural month, even though the VAT rate is different Invoices received from the same supplier with global taxable base under 6,000 and individual taxable base under 500 Express mention to register amendments due to material errors made in the registration, which should be made before the 16th day of the following month Exonerations Taxpayers obliged to comply with the ISI would not be obliged to file the following returns: Annual return of transactions with third parties (form 347) Monthly return of operations included in the VAT Books (form 340) for businesses included in the Monthly VAT Refund Regime According to the Annual Summary VAT return (form 390), it is foreseen that it will not be compulsory either Penalties associated Delays in the provision of information will be fined with 0.5% of the invoice amount, with a quarterly minimum of 300 and maximum of 6,000. Although it is not expressly envisaged, the general penalties scheme should apply: Omissions or mistakes will be fined with 1% of the invoice amount, with a minimum of 150 and maximum of 6,000. The lack of electronic provision of information will be fined with 1% of the annual turnover, with a minimum of 600. Other topics As from 1 January 2017, the invoices issued for business to business transactions could be issued until the 16th day of the month following the tax point. The optional inclusion in the ISI could be made in June 2017 or November of each year. The self-billing agreements should be communicated to the STA. The Basque region and Navarra have not yet passed the ISI, but it is expected that it also will be implemented in those locations. Compliance obligations From 2017, the deadlines for filing VAT returns for taxpayers who file on a monthly basis will be extended to the 30th day of the following month, or for the return relating to January, until the last day of February.
4 Indirect Tax Alert For additional information with respect to this Alert, please contact the following: Ernst & Young Abogados, Madrid Eduardo Verdún +34 91 572 7421 eduardo.verdunfraile@es.ey.com Fulgencio García +34 91 572 7658 fulgencio.garcia@es.ey.com Laura Ezquerra +34 91 572 7570 laura.ezquerramartin@es.ey.com Diana Garrido +34 91 572 5093 diana.garridohernando@es.ey.com Ernst & Young LLP, Spanish Tax Desk, New York José Antonio Bustos +1 212 773 8954 joseantonio.bustos@ey.com Manuel Paz +1 212 773 4164 manuel.pazfigueiras@ey.com
EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. Indirect Tax 2016 EYGM Limited. All Rights Reserved. EYG no. 04337-161Gbl 1508-1600216 NY ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. ey.com