B Law & Tax
17 January 2024

Tax Advisor: Jurisprudential change: right to VAT deduction

In light of Supreme Court resolutions numbers 236/2023 and 237/2023, both dated February 23, 2023, the Central Administrative Economic Tribunal (TEAC) adjusts its previous position, adopting a jurisprudential perspective. It is established that the right to deduct VAT is inherent to the taxpayer, not being a tax option according to Article 119.3 of the General Tax Law (LGT).

It is emphasized that this right cannot be prohibited even if exercised belatedly, as long as it is done within the deadline established in Article 99.3 of the VAT Law, according to resolution number 6065/2021, dated October 24, 2023.

In these judgments, the Supreme Court concluded that the exercise of the right to deduction is not a tax option according to Article 119.3 of the LGT, as it does not meet the fundamental elements to define tax options. This is because it does not imply an alternative choice between different tax legal regimes. The Supreme Court analyzed whether, given the circumstances of the case, the taxpayer had the right to correct a supplementary self-assessment, concluding affirmatively.

However, the TEAC maintains that the Supreme Court’s criteria apply generally and are not limited to the specific case in dispute. In summary, the administrative entity changes its position, adopting the jurisprudential perspective and confirming that the right to deduct VAT is a right of the taxpayer that must be exercised, even in cases of belated self-assessments, provided that the following requirements are met.

 

Article 99.3 of the VAT Law:

The right to deduct VAT can be exercised in the declaration-settlement of the period in which the taxpayer incurred such VAT, and in subsequent periods, as long as four years have not elapsed since the generation of the right. In cases of bankruptcy declaration, this right must be exercised in the declaration-settlement of the period in which the deductible amounts were originated.

If deductible amounts were not included in the corresponding declaration-settlements, and four years have not passed since the generation of the right, the taxpayer can deduct them by correcting the declaration-settlement of the period in which they were incurred.

In situations of request or inspection, properly registered amounts are deductible, while those not registered can be deducted in the accounting period or in the following ones, as long as the mentioned period has not elapsed. For occasional sales of new means of transport, the right to deduction is only possible in the declaration of the period in which the delivery takes place.

 

 

 

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