Non-resident companies cannot request VAT refunds through the special scheme if they do not carry out operations

The management of credit balances in Value Added Tax (VAT) for non-resident entities presents technical nuances that determine the recovery route for such amounts. A recent binding ruling from the Dirección General de Tributos (DGT) addresses the possibility of requesting a refund of the balance resulting from a self-assessment when, in the following fiscal year, the entity has not carried out operations subject to the tax.

What the DGT has ruled

The ruling analyzes the procedure for the refund of credit balances in cases where a commercial entity not established in Spain has not carried out VAT-taxable operations during the fiscal year following the one in which the balance was generated. Current regulations, specifically the special scheme provided for in Article 119 of the VAT Regulations, establish conditions for the recovery of these amounts.

The Administration's criteria establish that to avail of the refund mechanisms provided for in the regulations, there must be an activity that supports such a request. The absence of taxable operations in the following fiscal year conditions the application of the credit balance refund procedures, as the special scheme is designed for entities that maintain an economic activity subject to the tax.

What it means for you

If your entity is a commercial company not established in Spain and carries out operations subject to VAT, you must take special care with the planning of your tax returns. The impossibility of using the special refund scheme in periods without taxable activity implies that:

• The generated credit balance cannot be recovered automatically through the simplified mechanism if there are no operations to support it in the following fiscal year.
• The lack of taxable operations alters the balance recovery procedure, forcing compliance with the general rules of Law 37/1992 and RD 1619/2012.
• There is a risk of blocking the company's liquidity if there are credit balances that cannot be managed under the special scheme due to a lack of activity.

What should be done

Given the existence of VAT credit balances, it is necessary to evaluate the nature of the operations planned for the following fiscal years. It is fundamental to determine whether the entity will continue to carry out taxable operations that allow for the use of the special refund scheme. In the event that activity is intermittent or a period without taxable operations is foreseen, the compensation route or the statute of limitations must be analyzed according to the General Tax Law to avoid losing the right to the balance.