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V2000-16 10 May 2016 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IVA · base imponible

VAT on unpaid invoices cannot be recovered if VAT Act deadlines and requirements are not met

A notary inquired whether it was possible to recover VAT from a debt dating back to 2000 and to deduct the insolvency provision for Personal Income Tax (IRPF) purposes. The Directorate General for Taxes (DGT) ruled that the VAT cannot be recovered as the legal deadlines have expired. Furthermore, the IRPF deduction will depend on when the expense should have been recorded, warning that if the tax year is statute-barred, the deduction will not be permitted.

The question raised

1. Whether it is possible to recover the VAT corresponding to unpaid invoices, considering that no modification of the VAT tax base was ever performed due to such insolvencies.

The DGT's ruling

To recover VAT, credits must meet the insolvency requirements of Article 80 of Law 37/1992, and the modification of the tax base must be carried out within the established timeframes. Regarding Personal Income Tax (IRPF), the expense for credit impairment must be recorded accounting-wise as soon as the risk is known. If the expense should have been allocated to a fiscal year that has already expired, it shall not be tax-deductible in subsequent fiscal years to prevent taxation lower than what would otherwise correspond.

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