If you have an SME or you are self-employed, one of the problems you will eventually face is the non-payment of invoices, which will mean that you will need to advance the VAT on these unpaid invoices. In these situations, a number of questions arise, such as the following: is it possible to recover VAT, what procedure must be followed and what deadline must be met? In this article we answer all your questions.
When is an invoice considered to be unpaid?
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Before taking the steps to recover the VAT on an invoice because it is considered unpaid, you must analyse the situation and prove that it is uncollectible. In order to consider it uncollectible, it is important that you take the following into account:
- Deadline. The Inland Revenue considers that, if more than six months have passed since the due date of the invoice, small businesses and the self-employed can initiate the procedure for the recovery of VAT on unpaid invoices. In the case of large companies, the deadline is one year. For example, if you are the owner of a small business and you have an unpaid invoice due in July, you will not be able to claim it back until October.
- Registration. The invoice issued and pending payment must be included in the book of invoices issued.
- Addressee. The invoice recipient must be a company or a professional. In the case of a private individual, the taxable base must be greater than 50 euros.
- Claim. The claim for the unpaid invoice must have been made by judicial or notarial means, or by some other means that reliably accredits the claim, for example, a burofax with acknowledgement of receipt and certification of the text.
What does the debtor have to do if there is an unpaid invoice?
If there is an unpaid invoice, the debtor will have to deal with the creditor’s claims by any means. In addition, he will have to carry out certain formalities with the Tax Agency, for example, he will have to record the corrective invoice as a reduction of the deductions made in the VAT return. You will also have to notify the tax authorities of the receipt of the corrective invoices.
What procedures do I have to follow to recover VAT?
If you want to reclaim the VAT you paid on the unpaid invoice, you must issue a corrective invoice and, to do so, follow the steps below:
- Draw up a corrective invoice with the same concept as the original invoice and making reference to it. The amounts will be reflected in negative and the numbering of the invoice will be different from the rest.
- Register the invoice in the book of invoices issued.
- Inform the Tax Agency of the issuing of the invoice telematically using the form available at the electronic office. When filling in the form, certain documents must be attached: a copy of the corrective invoices and proof of claim for the unpaid invoice.
In which cases is it not possible to request a VAT refund?
There are certain cases in which VAT refunds cannot be claimed. These are as follows:
- Credits with a real guarantee. In other words, these are cases in which there is a guarantee provided by an entity or an insurance or surety contract.
- Bankruptcy credits.
- Credits relating to transactions with recipients not established in Spain.
What is the special cash criterion system?
The special cash basis scheme is a way of settling VAT that allows tax to be paid only if the invoice has been collected. However, this scheme can only be applied if the supplier’s invoices have been paid in full.
The special cash basis scheme applies in two cases:
- To professionals and entrepreneurs who have a turnover per year that does not exceed 2,000,000 euros.
- To business people and professionals who do not receive more than 100,000 euros per year from the same client.
Take into account that in order to apply for this regime you must do so by means of form 036 or 037. The form must be filed up to the month of December of the previous year in which you want the regime to apply. For example, if you want the special cash basis regime to apply in 2024, you must file form 036 or 037 before 31 December 2023.
In short, VAT on unpaid invoices can be reclaimed, but it is important to be proactive so that non-payment does not occur. For example, you can take certain actions such as checking the customer’s solvency or requesting guarantees.
If the non-payment occurs, the first step is to verify that it is indeed a non-payment and not a mistake, then you will have to claim the invoice out of court (or in court) and if the non-payment persists, it will be time to claim the VAT refund.
In important procedures such as this, a team of experts can facilitate the process and make it run smoothly. If you need help, at Leialta we offer you our team of tax advisors, who will be able to analyse your case and carry out the procedures for you to recover the VAT on the invoices unpaid by your clients.
