Spain: The payment of VAT returns under a declared emergency. Application of the general postponement regime under anomalous circumstances when no special provisions are contemplated by the emergency regulations.

We commented in our last entry about the special measures adopted by the Spanish Government as regards the filing and payment of periodical VAT returns during the COVID-19 crisis, namely: None. 

Let’s remind the readers that periodical VAT returns are excluded from the special provisions foreseen in article 33 of the Royal Law-Decree 8/2020, which contemplates an extension of voluntary payment deadlines until the 30^th of April (for existing liquidations)/the 20^th of May (new ones) of taxes liquidated by the tax administration as a result of a voluntary or an executive procedure. For the case that there still existed any doubts, when commenting about the new regulations the website of the Spanish tax administration makes it very clear of the maintenance of the status quo. 

We also reminded about the absence of special measures affecting the general regime for the postponement of tax debts, except for the specialities granted in article 14 of Royal Law-Decree 7/2020  to small companies (those with a turnover under 6 million Euros) as regards tax debts under 30,000 Euros, which could apply for a 6 months postponement (3 months interest free). 

As a result, regardless of the existing COVID-19 crisis, companies having to face the filing and payment of their Spanish VAT returns, will have to do it without the existing dead-lines (30th / 25th of the month following the closing of the period declared depending if monthly or quarterly returns)  with no alternatives other than: 

- File and pay the resulting VAT debt. 

-File and apply for the total or partial suspension which, unless benefiting by the specialities foreseen for the COVID-19 crisis, would involve either: 

• Offering a bank guarantee or insurance policy, or 

• Applying for the possibility to substitute the same by an alternative guarantee or for a release of the obligation to guarantee. In both cases the tax authorities are very restrictive about granting their acceptance which involves the submission of a much-detailed information proving the impossibility to provide a standard guarantee.

 It should be remembered that the lack of payment within the VAT return voluntary period, should the company  fail to formally apply for the postponement of payment or the application lacked the required documentation, would trigger the executive collection procedure and the application of a surcharge ranging from the 5% up to the 20% depending of the phase of the administrative collection procedure at the time of payment.

 Paradoxically, such an executive procedure would benefit from the special provisions which were denied to the company when self-assessing and filing the VAT returns and which now, for the cost of the 10% executive surcharge plus late payment interests, would be allowed a new deadline for voluntary payment of the increased amount up to the 20^th of May.

Under the circumstances it is to be expected that, when the moment arrives to file the next VAT return (the 30th of March),   a significant number of companies are not in a financial position to pay the resulting VAT debt nor to gather the required guaranties or supporting documents for applying for alternative postponement options.

 It is to wonder how the administration would act (and when given the paralysis of deadlines for addressing to any administrative requests for the duration crisis), in the face of a situation where applications for the postponement of payment multiply and many of them are likely to miss the required formalities. Should the authorities adopt a literal approach when applying the general postponement regime regulation, this would lead companies having failed to provide the documentary evidence of their inability to pay or guarantee, to be liquidated an executive surcharge of 10% plus late payment interests which, as mentioned, would benefit from the extended voluntary payment deadline until the 20^th of May. 

We also wonder if the Spanish Courts would support a negative answer from the administration should the same act according to the letter of the law instead of following its spirit, for the case that a company, having directly applied for a postponement of payment of its February VAT return until the 20^th of May, without the provision of guaranties or the complete required documentation for avoiding such obligation, in the face of a clear exceptional situation recognized by the State itself.