It is important that you know how the reversal of the VAT taxpayer works, since bad management can lead to sanctions by the Tax Agency.
But, when does the reverse charge apply? There are several cases provided for in the regulations governing this tax. However, one of the most common is when carrying out intra-community operations. Intra-community VAT works in a different way and in this article we show you all the keys.
What is the passive subject?
Article 84.1 of Law 37/1992, of December 28, on Value Added Tax (VAT) defines the passive subject to those natural or legal persons who have the status of businessmen or professionals and deliver goods or provide services subject to VAT.
In other words, the taxpayer is the one who bears the tax obligation and, as a general rule, is the one who makes the delivery or provides the service. It is characterized by the fact that it issues an invoice in which the corresponding tax is passed on to its client.
At the end of the settlement period (every quarter), the taxpayer must declare this tax to the Tax Agency and comply with the obligation to pay it.
What is reverse charge?
Having seen who the taxpayer is, it is worth noting that article 84 of the aforementioned VAT Law states in point 2 that there are certain cases in which the recipient of the commercial operation is the taxpayer.
This situation is known as reverse charge, since the tax obligation is reversed and the recipient of the goods and services is the one who must be in charge of declaring the VAT through self-assessment.
However, for the inversion of the taxable person to take place, it is necessary that the recipient of the goods and services is a businessman or professional and that he acts as such in the operation.
In which cases does the inversion of the passive subject take place?
The cases in which the inversion of the taxable person can occur, according to the regulations (article 84.2º), are the following:
- When the operation is carried out by persons or entities not established in the territory of application of the tax.
- In the case of deliveries of raw gold or semi-finished gold products, of a law or higher than 325 thousandths.
- When the object of the operation is new waste from the industry, foundry waste and waste, residues and other recovery materials.
- Provision of services that have as their object emission rights, certified emission reductions and greenhouse gas emission reduction units.
- Deliveries of real estate made as a result of a bankruptcy process.
- Deliveries of exempt real estate, to which reference is made in sections 20 and 22 of article 20 of the VAT Law, when the taxpayer has not waived the exemption.
- Deliveries of real estate made in execution of a guarantee constituted on the real estate itself. In this case, the guarantee is extended when the property is transferred in exchange for the total or partial extinction of the guaranteed debt or the obligation to extinguish the aforementioned debt by the purchaser.
- In execution of work, with or without the contribution of materials, as well as the assignment of personnel for its execution, consequence of contracts directly formalized between the promoter and the contractor whose purpose is the urbanization of land or the construction or rehabilitation of buildings.
- Deliveries of silver, platinum and palladium.
- Mobile phone deliveries.
- Deliveries of video game consoles, laptops and smart tablets, when the recipient is a businessman or professional reseller and when he is not but the amount of the transaction exceeds €10,000 (excluding VAT).
How does intra-community VAT work then?
As you may have observed in the previous section, the investment of the taxable person is applied for the construction and sale of real estate. However, it is common to observe this situation in intra-community and import operations (deliveries of goods or provision of services made by persons or entities not established in the territory of application of the tax).
This means that the taxpayers of intra-community VAT are those who make the acquisitions. At this point, you may be wondering how billing works in these cases.
Procedures to issue invoices with reverse charge
In principle, in order to carry out operations under the parameters of the intra-Community VAT it is accurate sign up for ROI (Register of Intercomunitaries Operators). This applies both to the one who delivers the goods or provides services and to the customer.
Once registered in the ROI, You will be assigned a NIF-VAT or VAT. It is a tax identification number for a Spanish company that is preparing to operate in European territory. It is similar to the NIF, but at a European level. allows the registration in the VIES census to operate in the community territory.
How is the invoice made and how to declare intra-community VAT?
Once the procedures have been carried out and you are ready to carry out an activity in the common European territory, the provider of goods or services must issue an invoice to your client, but without VAT. The document itself must include the VAT-VAT code and mention that it is an operation in which the taxpayer's investment is applied under article 84.2 of Law 37/1992.
Subsequently, declare these amounts in the VAT settlement (Box 61 for model 303 and 523 for model 390).
In the case of the recipient of the goods or services, which occupies the role of taxpayer due to the investment, it must self-deduct the VAT from the invoice. In other words, you have to pay the VAT to later reflect the amounts in the 303 and 390 model. It is necessary to include both the accrued VAT and the deductible VAT. Normally, the figures usually coincide and the payment is neutralized.
In this post we have explained all the details of this type of intra-community VAT, how to declare it, what VAT is and in which cases the taxpayer must be reversed.
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