Deferred VAT on imports
What is it and how to request deferred VAT?
When you purchase the merchandise for your business from suppliers within the national territory or from the EU countries, the consumer pays VAT at the time of purchase and you deliver the amount of said tax when you submit your statement to the Tax Agency.
The situation is different for companies that enter the country goods that will be used in commercial or professional activities and that come from countries outside the European Union. If this is your case, you have the obligation, in the first instance, to cover both the amount of the tariffs (import duties) and the taxes with which the merchandise is taxed.
But that is not all. You will have to pay the import tax, which amounts is 21% in most cases, although there are certain products that are under the reduced VAT (10%) or super reduced (4%) VAT scheme.
What does it mean to pay VAT on imports?
Instead of paying the import tax at the time of the quarterly declaration, as with other charges, it must be covered when you submit the Single Administrative Document (DUA), that is when you receive your merchandise at customs. In other words, you and not the end-user will pay for it. If you do not meet this requirement, you will not be able to take the merchandise with you.
When you make your next statement, you can process the deduction of the tax paid at customs. Under the conventional regime, the only one in force until a few years ago, it may take up to three months before this occurs. In the meantime, you must have sufficient funds to pay VAT.
What is deferred VAT on importation?
On January 1, 2015, Law 28/2014 entered into force, which gave way to the creation of the VAT Deferral Regime and amended Article 167.two of Law 37/1992, referring to Value Added Tax.
One of the main benefits of deferred VAT is that you can leave for a later date the declaration and payment of the import tax, that is, at the time of self-assessment of all VAT modalities.
In order to benefit from this concession, you need to enrol in the VAT Deferral Regime. If you do, the obligation to declare the tax will become monthly, instead of quarterly. This will apply to all non-EU imports that are made as of the entry into force of the new regime.
How to request deferred VAT
- To become part of the regime that allows deferring VAT settlement, you must meet the following conditions:
- Exceed 6,010,121.04 euros in volume of operations in the year immediately preceding the moment of applying for registration in the new regime; or have acquired business assets that would have returned to the owner, together with their operations of the previous year, a volume greater than the aforementioned.
- Be enrolled in the Special Monthly Return Regime (REDEME).
- Be part of a group of entities that qualify for the corresponding special regime.
- Request to the Administration the census declaration (modelo 036) within the period established to declare under the VAT Deferral Regime at the beginning of the next calendar year.
- Take advantage of the scheme from the moment you register as a new company.
To become part of the special regime from 2020, you must make your request from the first to the last day of November prior to the start of the calendar year in which it must take effect. Once registered, you will remain in this scheme for an indefinite period unless you decide to change the regime or the Tax Agency (AEAT) has valid reasons to unsubscribe.
How the deferred VAT settlement is carried out
Now, let’s see how is the process to credit deferred VAT. Whenever you receive merchandise from a non-EU country, you have to deliver the DUA. Then, the customs personnel will verify the regime to which you belong by consulting your NIF in the system.
Once confirmed that you are part of the scheme in question, you will enjoy the benefits of deferred VAT. First, you will be exempt from the obligation to pay such tax at customs. In addition, you will not have to fill out form 031 (Payment and foreign trade inquiries).
From now on, you will carry out the liquidation of the VAT on the import when submitting the modelo 303 (Self-assessment of the Value Added Tax) of the month in which you have made the DUA process.
When justifying VAT on imports in modelo 303, it is essential to checkboxes 33 and 77, which refer to the “quotas borne in imports” and the “VAT on import pending entry”, respectively.
Finally, we inform you that, at the AEAT Electronic website, you will be able to check how much the import VAT deferral fees for the current month amount, as well as the status of your debts (if you have outstanding commitments). Make sure that what you declare exactly matches the information that the Tax Agency has.
Applying to the VAT Deferral Regime is completely voluntary. As a taxpayer, it is up to you to determine if you meet the requirements to enrol in it. You should also assess whether your import volume is such that it justifies making such a change.