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Non-resident companies operating in Spain vs SII vs Obligatory E-invoicing vs Statutory requirements of invoicing systems

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Monday, 18 December 2023

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I. Spanish IT regulations affecting VAT

There are different local regulations affecting IT aspects of Spanish VAT, with different level of implementation or scope although. They are complementary and not exclusive, regardless of their likely need to be adapted to future changes in the EU regulations resulting from the ViDA plan.

I.1 Immediate Information Supply (SII)

The “Immediate Information Supply” or SII refers to the obligation affecting some qualifying taxpayers to electronically file the data contained in their VAT registers at the website of the Spanish Tax Agency on, almost, real time basis T( 4 days from the moment the sale invoices are issued or when the received invoices are accounted for).

This obligation was introduced by Royal Decree 596/2016, of 2 December, and

has been in force since 1st July 2017, although affecting to transactions incurred since 1rst January 2017.

I.2 Obligatory E-invoicing

Law 18/2022 of 28 September regulating the creation and growth of enterprises introduced a general obligation to issue electronic invoices in B2B transactions. Until then this obligation only applied in the common VAT territory to transactions between companies and the Spanish administrations or their public bodies (the, so called, B2G operations).

The implementation of obligatory B2B e-invoicing is delayed until 12 months are elapsed from the date when the existing draft Ordinance of 15 June 2023 is approved and published in the Official Gazette (24 months for companies with a turnover under 8 million Euros) Note.

I.3 Statutory requirements of invoicing systems

To fight against tax fraud the Spanish General Tax Law contemplates the possibility that the software used by companies for their invoicing processes may be subject to public regulation. This possibility has been implemented by Royal Decree 1007/2023, of 5 December (published at the Official Gazette of 6 December 2023) that approves the ordinance that regulates the technical requirements of invoicing software.

The specific technical specifications and functions regulated at said Ordinance - i.e. structure of the billing records for entries and cancellations, responsible declaration, additional invoicing data to be included in the SII reports, etc.- are to be developed by Ministerial Orders which at this moment are pending.

The Ordinance contemplates that the obligation to use compliant invoicing software will have to be implemented by companies before 1^st July 2025. On their side, software developing or commercializing such a software will be obliged to adapt to the new regulations within the 9 months following the publication of said developing Ministerial Orders (in any case, before1^st July 2025 for those software developing/commercialization companies which have pluriannual maintenance contracts signed before the previously mentioned dead-line).

II. Status quo regarding IT regulations of non-resident companies operating in Spain

As a pre-requisite for non-resident companies operating in Spain to be obliged by the commented Spanish IT regulations is to be withing the scope of the Spanish local VAT and invoicing regulations:

This would normally be the case when, regardless of the company being established or not in the Spanish VAT territory, it is the appointed taxable person for the Spanish VAT accrued in the transaction, as happens when the following circumstances occur:

The transaction incurred by the company locates in the Spanish VAT territory and,

No internal reverse charge rule applies whereby the position of taxable subject shifts from the supplier to the client (i.e. B2B supply of goods when the client is another non-established).

However, the fact that, because of its operative, a non-resident company must comply with the Spanish VAT and invoicing regulations does not necessarily mean that it is also obliged to be compliant with said IT regulations as results from the subsequent comments.

II.1 Immediate Information Supply (SII)

It affects companies, resident or not, having to file monthly VAT returns, namely:

Those considered as large entrepreneurs for VAT purposes
(turnover in Spain over 6 million Euros).

Those applying the so called REDEME (special monthly VAT refund regime).

Those belonging to Spanish VAT Groups.

Besides, companies can also opt for the voluntary application of the SII.

II.2 Obligatory E-invoicing

When regulating its subjective scope, the e-invoicing draft ordinance, excludes from the obligation to issue and deliver electronic invoices on B2B transactions those cases “when any of both parties of the transaction has not its business site or a permanent establishment to which the invoicing is addressed in the Spanish territory or, failing that, its domicile or habitual residence”.

For clarity’s sake the following precisions must be introduced:

In principle, it is to be understood that it is the VAT and not the Non-Residents Income Tax regulation, that need to be considered when determining if there is a permanent establishment and, so, the obligation to issue e-invoices on the B2B transactions carried out by the same.

The fact that a non-resident company is not obliged to issue e-invoices for those B2B transactions carried out in the Spanish VAT territory does not means that it is not obliged to comply with the Spanish invoicing obligations for the case that it is the VAT taxable subject, as commented above.

Also, the fact that there is no obligation to issue e-invoices complying with the technical standards of the future e-invoicing Ordinance, does not mean that other type of e-invoices cannot be issued for the case that:

There is an e-invoicing agreement between the parties.

The client asks for an e-invoice making use of the option provided for B2C transactions as foreseen in mentioned Law 18/2022 of 28 September.

II.3 Statutory requirements of invoicing systems

The obligation to use a compliant invoicing software will not be obligatory to:

Non-resident companies which, according to the Non-Residents Income Tax regulations do not operate through a permanent establishment in Spain.

If the draft version is maintained in the published e-invoicing Ordinance, a contradiction may result since:

For the purposes of the obligation to issue e-invoices regulated in said Ordinance, it appears the definition of permanent establishment contained in the VAT regulations will apply.

For determining if there is the obligation to use a compliant e-invoicing software, it is the definition of permanent establishment resulting from to the Non-Residents Income Tax regulations which applies.

As not always a VAT permanent establishment would also be considered to be a permanent establishment for Non-Residents Income Tax purposes, there would be the paradox that a company obliged to issue e-invoices according to the Spanish standards, would be excluded to the obligation to use an e-invoicing software complying with the Spanish regulations.