Law 31/2022 of the General State Budget for the year 2023 has introduced important improvements in the recovery of unpaid VAT. Among other new features, it extends from three to six months the period that your company will have to carry out the necessary procedures for VAT recovery.
We inform you that if your company has any unpaid VAT, important improvements have been introduced by Law 31/2022 of the General State Budget for the year 2023 (LPGE) when it comes to recovering the VAT charged, extending the deadlines for carrying out the procedures and making the way of claiming payment more flexible.
Until 2022
Until 31 December 2022, if your company wanted to recover VAT on unpaid VAT, the tax authorities required you to meet the following requirements, among others:
- Six months or one year had elapsed since the date of the sale. In the case of invoicing more than 6,101,121.04 euros per year, the waiting period was one year.
- That the debt had been claimed through the courts or by notarial summons.
- And that the rectification of the unpaid invoices and the rest of the procedures to recover the VAT were carried out within three months of the expiry of the six-month period or the one-year period, as applicable.
Moreover, in case the defaulting customer was not acting in the capacity of a business or professional (i.e. if he was a private individual or a public body), it was only possible to recover VAT on invoices of more than EUR 300 (excluding VAT). In the case of invoices of the same or lesser amount, your company had to write off the VAT, so it was better to collect in cash and not to defer payment.
New regulation by the LPGE as of 2023
Law 31/2022 on the General State Budget has modified, with effect from 1 January 2023, the procedure for the recovery of VAT and Canary Islands General Indirect Tax (IGIC) accrued in cases of non-payment, as follows:
- Modification of the taxable amount is allowed in the case of uncollectible debts as a result of insolvency proceedings declared by a court in another Member State.
- The minimum amount of the taxable amount of the transaction is reduced from EUR 300 to EUR 50 where the defaulting customer is a final consumer (where the customer is not acting as a trader or professional). It should be understood that this change affects not only transactions carried out from 2023 onwards but also those carried out previously and which are still within the deadline to be rectified. Thus, for example, if your company provided a service to a private individual on 16 January 2022 for 250 euros plus VAT that turned out to be unpaid, from 16 January 2023 you will have six months to rectify the invoice and carry out the rest of the formalities.
- The possibility is established of substituting the claim (which is one of the requirements for recovering VAT), judicial or notarial prior notice to the debtor with any other means that reliably accredits the claim for collection from the debtor (for example, by means of a burofax).
- The period for recovering the tax from the time the claim is declared uncollectible is extended from 3 to 6 months. This last measure is accompanied by a transitional regime so that all VAT taxable persons whose modification period had not expired on the date of entry into force of the Law can benefit from the new 6-month period.
Specifically, in the event of non-payment, when on 1 January 2023 the company is within the former period of three months from the end of the six-month or one-year period for rectifying (i.e. when on that date a company is in the processing period), this will be considered to be extended to six months.
For example, if your company invoices less than 6,101,121.04 euros and on 2 May 2022 you made a sale that was not paid, according to this special rule, despite the fact that it was a transaction made in 2022, your company will have six months from 2 November 2022 to rectify the invoice and carry out the rest of the procedures to recover the VAT.
You can contact our office for any questions or clarification you may have in this regard.
