The procedure for applying for the refund
of foreign vat can become an unrecoverable cost

For Paula Valdecantos, “VAT obligations will be increased to electronic interfaces when companies established outside the European Union sell their products to private individuals in the Community through them.

We interviewed Paula Valdecantos, Head of Foreign VAT at Euro-Funding. Paula is an expert in VAT management in intra-community operations, so today answers questions about the procedures to be followed in the complaint of this tax and explains how the supplies of goods to the UK will be after their departure from the European Union.

What procedure should a company established in Spain follow to prevent the VAT it bears in other Member States from becoming an unrecoverable cost?

Firstly, an analysis should be made of the operation to be carried out in each Member State in accordance with the internal VAT rules of each country and this regardless of whether the operation to be carried out is the same.

Once this analysis has been carried out, it will be concluded whether the activity you carry out would require registration for VAT purposes in the various Member States where operate. In this way, in the event that there are VAT credits outstanding recovery shall be decided by (i) the procedure for non-established employers or on the contrary (ii) in case the Whenever VAT identification is required, the refund of input VAT will be will be requested by submitting the periodic VAT returns.

In view of the above, and in order to ensure that VAT borne in other States members is neutral and does not represent a cost for the company, it is important to have good defined the procedure for the application for refund of the same since, the time limit for exercising the right of deduction is not the same for both procedures.

With the United Kingdom’s forthcoming departure from the European Union, scheduled to take effect on 1 January 2021, how will deliveries of goods from the European Union to the United Kingdom be affected?

With the entry into force of Brexit, the United Kingdom will be treated for VAT purposes as a third country, so that supplies of goods from the European Union to that country and vice versa will no longer be treated as transactions intra-Community and will be treated as exports or imports of goods.

In order to carry out these transactions, companies will have to apply for an Economic Operator’s Identification Number (EORI).

Likewise, and in order to facilitate customs formalities, it would be advisable for economic operators to apply for authorisation as an Authorised Economic Operator (AEO).

Do you think that extending the application of the one-stop shop to intra-Community distance sales of goods will make it easier for Spanish entities to carry out this type of transaction?

Yes, insofar as, with the extension of this system to distance sales, the administrative burden on companies for this type of operation will be limited quite a lot since when sales are located in the State member of destination of the goods, the corresponding VAT may be paid to each country through a single declaration to be submitted in the Member State of identification. As a result, VAT registrations will no longer be compulsory in the Member States members of destination of the goods when the thresholds set by them are overcome.

Furthermore, how does the new regime for distance sales of imported goods affect electronic interfaces?

VAT obligations for electronic interfaces will be increased when companies established outside the European Union sell their products to community individuals through them. In this sense, and provided that meet certain requirements they could become taxable under this regime as the rule will presume that they act as intermediaries in their own name in sales to individuals. In other words, it will be the tax payers who settle the tax on the final consumer in this type of operation.