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V1857-14 11 July 2014 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · iva repercutido

Non-recoverable VAT is deductible for Corporation Tax if recorded as an accounting expense

A company has enquired whether excess VAT that must be paid following an inspection, and which cannot be recovered from customers, is a deductible expense for Corporation Tax. The Directorate-General for Tax (DGT) has ruled that it is deductible provided it is recorded as an accounting expense and meets the requirements for accrual and substantiation.

The question raised

Whether the amount not refunded and the amount overpaid as a consequence of the settlement, which cannot be requested from customers, constitutes a higher deductible expense for Corporate Income Tax purposes. And, if applicable, whether the expense can be recognized in the 2013 tax period, or when the appeal is resolved.

The DGT's ruling

The higher amount of VAT accrued that cannot be subject to recovery and is recorded as an accounting expense shall be tax-deductible for Corporate Income Tax purposes. To this end, it must comply with the conditions of accounting registration, accrual-based imputation, correlation of income and expenses, and documentary justification. Furthermore, it must not be an expense that is non-deductible for tax purposes due to the application of any specific provision of the TRLIS.

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