VAT ALERT - Resolution of January 4th, 2021. Refund procedure UK businesses
The Spanish Official Gazette (BOE) published on the of January 5th 2021 the resolution of January 4th 2021, of the Spanish General Directorate of Taxes (DGT), on the VAT refund to businesses established in the territories of the United Kingdom of Great Britain and Northern Ireland.
The concerned resolution recognizes the necessary reciprocity for the purposes of art. 119. bis of the Spanish VAT Law (i.e. 13th Directive).
The main issues to be outlined are:
- On the basis of the information provided by the UK authorities, in the territories of the United Kingdom no VAT refund will be granted for input VAT borne for:
- goods and services purchased which are not affected to business or professional activity;
- goods and services that are intended to be resold;
- goods and services that refer to entertainment or services of a recreational nature;
- acquisition of a motor vehicle;
- the rental or financial leasing of a motor vehicle , limited to 50% of the input VAT.
So, it is concluded that for the purposes of input VAT refund to businesses or professionals established in the territory of the United Kingdom, other than Northern Ireland, it will be understood that there is the reciprocity, being, therefore, not necessary to provide further documentation to give evidence thereof. Nevertheless, limitations or conditions referred above are to be taken into account in compliance with the aforementioned principle of reciprocity.
In addition, for the purposes of input VAT refund to businesses or professionals established in the territory of Northern Ireland, it is understood that there is the reciprocity regarding input VAT borne for services located in Spain, being, therefore, not necessary, to provide documentation to give evidence thereof. Nevertheless, limitations or conditions referred above are to be taken into account in compliance with the aforementioned principle of reciprocity.
- Refund will be granted in relation to requests submitted as of the date of this resolution, which should refer to input VAT borne after such a date and provide that have been made within the deadlines and the terms established by the Spanish VAT regulation.
- Northern Ireland is not part of the European Community only in relation to supplies of services so that procedure as per 13th Directive is to be applied. Bu the contrary, for the purpose of the VAT rules related to supplies of goods, intracommunity acquisitions and importations, Northern Ireland remains part of the European Community, hence, procedure as per 8th Directive is still applicable.
Last, account is to be taken of the fact that as of January 1st 2021, in line with the provisions stated by the 13th Directive, businesses applying for the VAT refund in Spain needs to appoint a tax representative which needs to be Spanish resident, and which will comply with all the formal obligations of the refund procedure being jointly responsible in case VAT is improperly refunded.