The problem of determining the VAT turnover of non-resident companies operating in Spain under direct registration. Criteria of the Spanish Tax Agency

Non-resident companies which, although operating without a permanent establishment, are obliged to file Spanish VAT returns because of their operative and, so, must register for Spanish VAT purposes (what is known as “direct registration”),

This is normally the case when such companies incur intra community acquisitions in Spain and, besides recapitulative returns and, if applicable, intrastate returns, they would have to file quarterly and yearly summary VAT returns and keep Spanish VAT registers of issued invoices, received invoices and intracommunity operations.

According to the Spanish VAT Law, companies having a turnover exceeding 6,010,121.04 Euros the previous year become “big companies” with effect since the 1^st January the following year and, as a result, would be obliged to:

• Modify their VAT status at the official Census of companies maintained by the Spanish Tax Agency (AEAT). Should the company fail to file the corresponding formal application, its VAT status would be changed ex officio by the Spanish tax authorities.
• Monthly VAT returns would have to be filed instead of the quarterly and yearly summary VAT returns.
• The company will come within the scope of the Immediate Information Supply (SII) and so the VAT registers must be kept in, almost, real time, at the site of the Spanish Tax Agency (AEAT) by complying with the SII reporting obligations.

Determination of the Spanish VAT turnover is not pacific for the case of those companies which, as mentioned, have a direct registration in Spain This is so because of the criteria followed by the Spanish Tax Agency, which considers that local sales incurred in Spain by a non-resident company and eligible to the reverse charge rule, must be considered when determining the VAT turnover, regardless of the fact that  is the same is not the taxable subject.

Basically, the supporting argument is no other that the amount of said operations must be included in box 125 of the yearly VAT summary (form 390) and, as a result, form part of the VAT turnover as results from box 108 of the same.

In our opinion, such a criterion is contrary to the definition of “turnover” in article 121 of the Spanish VAT Law and the interpretation of the same by binding consultations of the Spanish General Tax Directorate.

Given the proximity of the year end and the important implications to non -resident companies with a direct registration in Spain of becoming a “big company”, it is advisable that:

• The box 108 (“Total turnover”) of the yearly VAT summary return (form 390) and, to be filed in January is checked for the case that the mentioned amount of 6,010,121.04 Euros so the company can act accordingly.
• In case that the amount of not subject local sales to be declared in box 115 is the reason for becoming a “big company”, the possibility to claim against the modification of the company VAT status should be considered.

November 2023