Spain requires real-time submissions of VAT information

Madrid, Spain financial district skyline at twilight

Global Tax Alert

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Large enterprises operating in Spain are coming to terms with the latest requirements to file their VAT information on a real-time basis through the new online system set up by the Spanish tax authorities.

According to the information provided by the Spanish tax authorities, 63,000 taxpayers will be required to use the new system to file their VAT returns. It is expected that approximately 80 percent of the total business VAT invoicing in Spain will be filed through the new system from July 1, 2017. In addition, taxpayers can adopt the new system on a voluntary basis.

Key features

The new online system, known as Suministro Inmediato de Información (SII), was established by the Spanish tax authorities to collect, process and analyse VAT information from large taxpayers. From July 1, those taxpayers obliged to provide monthly VAT filings (i.e., large enterprises with a turnover of more than €6 million, VAT groups and taxpayers registered in the monthly VAT refund system), are required to submit their invoicing details in real time through the webpage of the tax authorities.

This new system requires taxpayers to submit their invoicing data through XML messages within a four-day period (an extended eight-day period is provided for the second semester of 2017). The submitted data will automatically upload to the taxpayers' various VAT forms on that website. Taxpayers who adopt this system will be released from manual filing of existing tax forms − including forms 347 (transactions with third parties), 340 (VAT books) and 390 (VAT annual summary).

Penalties for non-compliance

Delay in submitting invoicing data will result in fines of 0.5 percent of the amount of each invoice to be recorded, with a minimum fine of €300 and a maximum of €6,000, per quarter.

Mistakes and failure to submit invoicing details will result in penalties of 1 percent of the amount of each invoice to be recorded, with a minimum fine of €150 and a maximum of €6,000.

In cases of total failure to comply with the new system, the sanction will be 1 percent of the taxpayer's turnover, with a minimum amount of 600.

Key takeaways

The system, which was established through Royal Decree 596/2016, of 2 December, will completely change the current VAT formal requirements for large taxpayers and those who adopt it voluntarily. SII will allow the Spanish tax authorities to analyse VAT information immediately and on a real-time basis before the end of the filing deadline of each VAT return. The tax authorities will have access to additional invoicing information from each taxpayer through SII, and this is expected to reduce the number of information requests from the tax authorities. On the other hand, the system is likely to free up some resources for tax audits and may accelerate audit procedures in case of information mismatches.

Most taxpayers who are required to use the new system will probably need assistance to capture and supply the correct information requested by tax authorities in SII. IT solutions can be and have been developed to comply with this new system, but the tax risks are linked not so much with the technology but with the accuracy of the tax information captured and supplied by taxpayers. Where the IT solutions are provided by new players, it is critical for these new players as well as the taxpayers to analyse all the relevant invoices before the information is captured by the system.

It is advisable also for taxpayers to cross-check their information with data provided to the tax authorities by their clients and suppliers (especially if such information is also included in the SII). Any mismatches should be identified and amended as appropriate before the information is submitted in the new system. We expect that the tax authorities will be able to perform such cross-checks and identify mismatches relatively easily in the new system. When mismatches left in the submitted information are subsequently identified by tax authorities, taxpayers may face additional audits and queries that could be time consuming and costly.

Learn more about this development by contacting any of the authors.