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‘Reversal of the Liability’ Rejected by Spanish Courts
An item which keeps appearing in assessments made in tax inspections is the alleged failure to pay VAT in cases of so-called "reversal of the liability" where there is some breach of the formalities established in the VAT law. The 'reversal of the liability' generally occurs where the acquirer, established in Spain, must self-assess the VAT because the supplier is not established in Spain and the formal breach can consist of not issuing the proper self-invoices or not accounting for the transaction in the VAT books. Taxand Spain discusses the implications of 'reversal of the liability' and how this VAT exercise is perceived by the Spanish authorities.
Although in most cases there is no detriment to the public finances, in practice the inspectors were claiming the tax 'not paid over', allowing its deduction only after the VAT has been paid in addition to late payment fees and penalties. The Supreme Court has rejected the administrative practice on the grounds that the deduction right arises when tax becomes chargeable, meaning that the tax is chargeable and deductable at the same time. Companies based in Spain and importing from countries outside of Spain should be aware of this judgement and ensure that they are VAT compliant.
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