Not all VAT liability is the same when requesting a deferral

Darya Budova.

17/02/2022 Uría Menéndez (

Since 1 January 2017, “tax liability arising from taxes that must be legally charged” cannot be deferred, unless it is proven that the taxes charged have not yet been collected (article 65.2(f) of the General Tax Law).

In practice, the authorities seem to interpret this rule to mean that “VAT cannot be deferred” in general and without distinction. This explains, for instance, why they reject requests to defer tax liability arising from VAT inspection reports. And one can only wonder if this was actually what the legislature intended.

One would assume that, when the rule was drafted, the legislature was referring to VAT derived from the act of charging tax, which entails an influx of liquidity, as this is more in line with both what the statement of intent of Royal Decree-Law 3/2016 that introduced the possibility of rejecting the request states – “taxes being paid by the person who must bear them entails an influx of liquidity for the person who charges them” – and with the rule’s exception, which applies if VAT has not yet been collected. In other words, it appears that inadmissibility is linked to the taxpayer’s role as “collector” of the tax for which deferral has been sought.

However, the taxpayer’s role as “collector” seems to disappear when they file their self-assessment, with its entries and offsets. When, several years later, the tax authority issues a tax settlement and requests payment, this no longer constitutes a tax charge that generates an influx of liquidity justifying its non-deferability. This is an entirely separate tax liability.

In view of its ruling of 27 February 2019, Madrid’s Regional Tax Court seems to agree: “although it is true that these settlements relate to VAT, which is inherently an indirect tax that can be charged, this should not create confusion as to the type of debt for which deferral is sought, which is none other than the settlements the authorities carry out, and which fall outside the scope of article 65(f) of the General Tax Law".

The fact is that we have found cases in which tax-collection bodies have extended the interpretation at issue to administrative settlements in which the inspection’s regularisation only reduced the deductible input VAT..., meaning that there was, therefore, no output VAT liability, nor was the legal assumption of the inadmissibility of deferrals thus applicable, even in a more literal sense. And what was the authority’s argument to support this view? That when the tax authority settles by reducing deductible input VAT, it cannot be proven that VAT has not been collected and that the Regional Tax Court’s ruling only applies to settlements for VAT that was never charged. We trust that, in time, the rule will ultimately be interpreted in a manner more consistent with its intended purpose.

Contact lawyers

Other publications