VAT annual tax return (form 390) and begin of VAT prescription in Spain

02.2010

Regarding the Spanish tax administration's claims, the Tribunal Supremo declared, on date 25/11/2009, that the annual VAT report (tax form 390), which is submitted on 30 January of the following tax year, allows the interruption of the prescription period of this tax, which is of 4 years in Spain. This report summarizes the declared amounts of output VAT and input VAT of a whole year, and it provides additional information to the monthly or quarterly declarations submitted by the VAT taxpayer.

In the case considered, the discussion was about the moment from which the four-year period begins: from the quarterly declaration or from the annual summary report. The Spanish court concluded that this annual summary report must be regarded as a tax return, thus interrupting the VAT 4-year prescription period. Therefore, the 4 years prescription period of the year 2007 shall begin on 1 February of 2008.

This decision was of major practical importance. As the VAT requires a number of tax returns in the course of one year, and allows the accumulation of refunds over a number of years, there were contradictory views on whether the prescription began on the monthly or quarterly declaration, submitted, for example, at the beginning of the year, or in the annual summary report (which includes a whole year and is submitted, as previously stated, on the month of January of the following year). It is worth mentioning that the prescription ruling is beneficial or detrimental to both the administration and the taxpayer. We must also bear in mind that VAT refunds can add up to substantial amounts. For this reason, both the request for payment to the administration and the refunds to taxpayers will always need to take place within the mentioned four years, a period that starts from February of the following year.