Law 31/2022, the General State Budget Law for 2023, has introduced significant improvements to the recovery of unpaid VAT. Among other changes, the period your company has to carry out the necessary VAT recovery procedures has been extended from three to six months.
We would like to inform you that if your company has any outstanding payments, significant 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 December 31, 2022, if your company wanted to recover unpaid VAT, the Tax Agency required you to meet, among others, the following requirements:
- That six months or a year had passed since the date of sale. With an annual turnover exceeding €6,101,121.04, the waiting period was one year.
- That he had claimed the debt through legal channels or by notarial request.
- And that the rectification of unpaid invoices and the rest of the procedures to recover the VAT be carried out within three months following the expiration of the six-month period or the one-year period, as appropriate.
Furthermore, if the defaulting customer was not acting as a business or professional (i.e., if they were a private individual or a public entity), it was only possible to recover the VAT on invoices exceeding €300 (excluding VAT). For invoices of the same or lower amount, your company had to write off the VAT, so it was better to collect payment in cash and not defer it.
New regulations under the LPGE starting in 2023
Well, Law 31/2022 on the General State Budget has modified, with effect from 1 January 2023, the procedure for recovering VAT and the Canary Islands General Indirect Tax (IGIC) accrued in cases of non-payment, as follows:
- The modification of the taxable base is permitted in the case of uncollectible debts as a result of an insolvency process declared by a jurisdictional body of another Member State.
- The minimum amount of the taxable base for transactions is reduced from €300 to €50 when the defaulting recipient is a final consumer (when the client is not acting as a business or professional). This change affects not only transactions carried out from 2023 onwards but also those carried out previously that are still within the period for rectification. For example, if your company provided a service to an individual on January 16, 2022, for €250 plus VAT, which was not paid, you will have six months from January 16, 2023, to rectify the invoice and complete the remaining procedures.
- The possibility is established to replace the claim (which is one of the requirements to recover the VAT), judicial or notarial request prior to the debtor by any other means that reliably proves the claim for collection from the debtor (for example, by means of a burofax).
- The period for recovering VAT from the date a debt is declared uncollectible is extended from 3 to 6 months . This measure is accompanied by a transitional regime so that all VAT taxpayers whose amendment period had not yet expired by the date the Law came into force can take advantage of the new 6-month period.
Specifically, in the event of non-payment, when on January 1, 2023, the company is within the former three-month period from the end of the six-month or one-year period to rectify (i.e., when on that date a company is in the processing period), this will be considered extended to six months.
For example, if your company invoices less than 6,101,121.04 euros and on May 2, 2022, it made a sale that was not paid, according to this special rule, despite being an operation carried out in 2022, your company will have six months from November 2, 2022 to rectify the invoice and carry out the rest of the procedures to recover the VAT.
You can contact this professional office for any questions or clarifications you may have.
Warm regards,
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A Àmbit Assessor, SL has 40 years dedicated to the tax, comptable and labor consultancy of the Pime.
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