The risk of delayed invoicing

02.2014

VAT is an exceptionally formalistic tax that even dictates the exact timing for issuing invoices — not when it may be convenient for the supplier. VAT becomes chargeable when the goods are delivered or the services rendered. It is therefore not permissible to wait until the end of the year to issue invoices covering all the services provided throughout that year. If an advance payment has been received, an invoice must be issued corresponding to that payment. Failing to do so (for instance, issuing the invoice in December when it should have been issued in March) may result in the tax authorities imposing a penalty for having failed to declare the VAT in the relevant period — typically a fine of 50% of the unpaid tax.

Certain situations are less straightforward. For example, when does VAT become chargeable during a Christmas campaign that starts in October and ends in January of the following year? The Spanish Directorate General for Taxation (DGT), in its ruling dated 9 June 2005, clarified that the taxable event arises when the packaging, postage and logistics associated with the campaign are carried out — not when the payment becomes due, which may have been agreed for a later date.

++ Published at the tax newsletter of the German Chamber of Commerce in Spain related to VAT news ++