Spanish criterion regarding verification of VAT credits related to statute barred years
The Spanish Central Economic Administrative Court issued a ruling on 9 June 2020 regarding the tax authorities’ power to verify the offset VAT from a period beyond the relevant statute of limitations, which was four years in this case. (This case arose before the 2015 legislative reform of the Spanish General Tax Law took effect.)
The issue in the case was whether, for purposes of the VAT deduction mechanism, the tax authorities were entitled to verify the offset VAT with respect to years where the statute of limitations related to the tax year had expired. The court also looked at the matter from a different perspective, considering that if the taxpayer had requested a refund related to a year that was statute barred instead of compensation, it could lead to discrimination between different taxpayers if the tax authorities could not verify the right to a refund in different cases.
As a result of the 2015 legislative reform, though the statute of limitations remains four years, the law also provides that the tax authorities have 10 years to verify tax credits. The law makes a clear distinction between the power to verify and to calculate a tax. While the tax authorities cannot calculate a tax for a period passed the statute of limitations, the authorities can verify data from previous years even after the limitation period has run.
In the case at hand, the court concluded that the tax authorities can verify the VAT offset from periods greater than four years ago because the offset is considered a tax credit. To allow this would prevent discrimination in favour of the taxpayer. This right to verify the tax credits cannot be extended to those cases in which the regularization of the period whose result is to be compensated has been cancelled by a supervisory authority.