Amending the taxable amount for VAT purposes, with the resulting reduction to the amount of VAT originally charged, must be done by issuing a correcting invoice. After correcting the amount on the invoice, the taxable person may make an adjustment on its VAT return or by applying for a refund of undue payments. At issue were the time periods for issuing the correcting invoices and making the tax adjustments. Garrigues, Taxand Spain, summarises the conclusions made by the Court in their latest newsletter.
The Court concluded that:
a) If the correction of the VAT charge derives from an amendment of the taxable amount as a result of any of the circumstances set out in article 80 of the VAT Law, the person has four years running from when those circumstances for issuing the correcting invoice occurred. This same time period operates for both increasing and decreasing the taxable amount.
b) After that correction on the invoice has taken place, if it requires the VAT charge to be decreased, the person only has one year in which to make the tax adjustment on the appropriate return (even if they have elected to apply for a refund of undue payments procedure). It must be remembered that the tax charged in excess must be refunded to the customer in the transaction.
The Supreme Court has therefore rejected the interpretation expressed by the Directorate-General for Taxes in binding ruling V0710-05, of 27 April 2005.