Spain

Reduced VAT extension on food products Ongoing inflation is prompting countries to deploy new fiscal strategies- or extend current ones. Our recent posts have captured Spain’s fluctuating VAT rates targeting specific niche sectors as it endeavours to restore some stability to its wider economy.   Much in the same way as Poland this month, Spain has opted to extend the zero VAT rate on certain food products until 31 December 2023, therefore extending the measures outlined in Royal Decree-Law 20/2022, which were initially expected to last until 30 June 2023. Specific other reductions on pasta and seed oils from 10% to 5% will also continue until the end of the year. However, unlike Poland, Spain has caveated that the extension will only apply if inflation is below 5.5%, indicating that fiscal policies are intrinsically linked to wider economic concerns- with inflation currently at the forefront of many EU Member States’ concerns.   It is currently expected that Spain’s previous 4% VAT rate for specific food products will be reinstated on 1 January 2024, alongside subsiding inflation.   Spain is a compliant territory for Kofax and we support all valid VAT rates in the country as part of our e-invoicing solution today. 

Draft Royal Decree publication outlining further B2B e-invoicing arrangements The Spanish Government has published a draft Royal Decree incorporating details around its projected Business to Business (B2B) e-invoicing mandate.   The exact e-invoicing model Spain had intended to facilitate was in many respects uncertain – the VAT in the Digital (ViDA) proposal had stalled Spain’s progress in confirming a precise e-invoicing model. Fortunately, the Spanish draft Royal Decree has answered many of the outstanding questions in respect of the mandate.   Amongst other issues, the draft Royal Decree has confirmed the following: 

• E-invoicing model: a hybrid centralised and decentralised model, where a public platform, alongside private certified platforms, can be utilised for invoice data exchange 
• Invoice formats: Facturae, CII, UBL, EDIFACT- which private platforms must have the capability to support 
• Digital signature requirements: required for private platforms only 
• Requirements for private platform providers: these include, amongst others, the ability to interoperate free of charge and the capability to accommodate all invoice formats, as well the obligation to send a copy of the invoice to the public platform  
• Specific buyer obligations: including the requirement to inform suppliers of the invoice status via specific responses, namely invoice acceptance or rejection and the corresponding date, as well the payment of the invoice and the corresponding date for this. 

As with many other proposed European mandates, the mandate advocates phased implementation, in line with the following: 

• Large taxpayers: 12 months after the Royal Decree publication  
• Remaining taxpayers: 24 months after the Royal Decree publication 

It is presently uncertain precisely when the draft Royal Decree will be approved. Spain is hosting General Elections in July 2023, and, amidst a period of intense political activity, it is certainly not set in stone that the text will be approved before this, or even whether a new potential government would be prepared to continue Spain’s current e-invoicing trajectory.  Crucially, it is also important to note that Spain has not yet requested EU derogation to mandate e-invoicing in the country. In line with the current VAT in the Digital Age (ViDA) timeline (still to be ratified), the derogation process is still active until 1 January 2024- signifying that Spain presently will still need to request derogation before it can implement B2B e-invoicing in the country.  The draft Royal Decree has now triggered a public consultation, which is open until 10 July 2023.   The draft regulation is available via the following link (in Spanish only):   https://portal.mineco.gob.es/RecursosArticulo/mineco/ministerio/participacion_publica/audiencia/ficheros/ECO_Pol_AP_20230619_RD_factura_electronica.pdf 

VAT reduction for specific goods Growing inflation across Europe has compelled several EU Member States to adjust their VAT rates. Often, these modifications have targeted everyday basic merchandise to create more affordable goods and services for residents. Spain had initially introduced some temporary VAT concessions in January 2023 by zero-rating specific food products. The Spanish government has now confirmed that these measures will continue up to 30 June 2023. Initial forecasts indicate that the fiscal measures Spain is initiating are working as inflation continues to plummet in the country. However, the inflation is still high enough for the Spanish government to continue the temporary zero-rating of specific food products, albeit for a temporary period. Spain is a compliant territory for Tungsten Network and our e-invoicing solution supports all valid VAT rates in the country.

The Basque Territory – Gipuzkoa Politically, in many respects, the Basque Territory perceives itself as distinct from mainland Spain. This perceived division extends further in the implementation of the e-reporting and e-invoicing mandates both countries are either implementing or proposing to implement.   The Basque Territory introduced a new mandate whereby taxpayers in the country are required to undertake real-time reporting within a framework referred to as Ticket BAI. The Basque Territory is a distinct mandate to that which we are expecting in Spain in the course of 2024.   The Basque e-reporting mandate operates via phased implementation, commencing in 2022 with suppliers based in Alava, and attention now moves to the Gipuzkoa region in the Basque territory.   E-reporting for the region Gizpuzkoa will become mandatory in June 2023.   Tungsten will not be supporting the Basque mandate in Spain and consequently, will no longer be creating the legal tax artefact for suppliers based in Alava. Tungsten will create a PDF image for suppliers which can be delivered to buyers and the PDF will clearly express that it is not the legal artefact. We will implement a similar solution for suppliers based in Gizpuzkoa.  

Public consultation for B2B e-invoicing and technical specifications postponement Developments with respect to B2B e-invoicing in Spain are taking pace as the Spanish government signals their intent to collate public sentiments around e-invoicing. B2B e-invoicing in Spain is expected to be mandated during 2024, although exact timelines are yet to be confirmed. You can read more about Spain’s B2B e-invoicing mandate, and the background to the associated Crea y Crece law, here.   The Ministry of Economic Affairs and Digital Transformation in Spain this month launched a public consultation on the proposed B2B e-invoicing mandate.  The scope of the questions contained within the public consultation are numerous and broad in nature, encompassing the following topics:  

• E-invoicing application scope, including exemptions 
• Whether the framework covers a public or private realm 
• Format interoperability  
• Platform interconnections  
• Invoice statuses 
• Submission to tax authorities  
• Considerations relating to small companies and the self-employed, and potential connection for low-volume issuers.  

The breadth of questions (specifically, 32 questions) suggests the government is keen to derive public sentiment that will ultimately shape the e-invoicing solution that Spain will adopt.     The public consultation ended on 22 March 2023, and can be accessed via the following link:  https://portal.mineco.gob.es/es-es/ministerio/participacionpublica/consultapublica/Paginas/Consulta_publica_creacion_crecimiento_empresas_factura_electronica_entre_empresas_y_profesional.aspx   Further details on the scope of the public consultation (in Spanish) is available via the following link: https://portal.mineco.gob.es/RecursosArticulo/mineco/ministerio/participacion_publica/consulta/ficheros/230302_Consulta_publica_creacion_crecimiento_empresas_factura_electronica_entre_empresas_y_profesional.pdf  The Crea y Crece Law was passed on September 2022, resulting in a 6-month timeframe for the Spanish tax authorities to produce technical requirements relating to their e-invoicing solution. However, it has now been confirmed that the technical specifications, due this month according to this timeline, have now been postponed. This is perhaps unsurprising, given that the public consultation only just concluded this month.  While we can expect Spain’s technical specifications to now be published later in the year, Tungsten looks forward to analysing these specifications with a view to determine how we can best serve our Spanish customers with the demands imposed by the mandate.  

Further application of the reverse charge Spain has further widened the scope of goods subject to the reverse charge, in addition to our update last month, which cited specific goods now subject to the reverse charge in the country. As previously stated, the reverse charge shifts the onus of paying VAT on the buyer rather than the seller and consequently, regulates the flow of VAT to governments and is therefore an effective mechanism to guard against tax evasion.   Gold, mobile phones, games consoles, laptops and computer tablets are now also subject to the reverse charge in Spain.    

VAT and indirect tax measures in State Budget 2023 Law 31/2022, dated 23 December 2022 on the General State Budget for 2023, introduced multiple VAT changes, alongside other modifications. Changes include:

• Amendments to the reverse charge on certain property related transactions and supplies of waste and scrap plastic and textiles;
• changes to 'use and enjoyment' provisions;
• new rules on claiming VAT bad debt relief.

‘Use and enjoyment’ provisions typically refer to the rule that determines the place of supply of a service, based on the use of such a service. Royal Decree Law 20/2022, dated 27 December 2022, extends, until 31 December 2023, the 5% VAT rate on certain supplies of electricity, and supplies of natural gas, briquettes and pellets from biomass, and wood for firewood used as fuel. The VAT rate on several basic food products has been temporarily reduced from 4% to 0%, and from 10% to 5% on olive and seed oils and pasta until 30 June 2023 (subject to certain conditions). Finally, specified existing reliefs relating to Covid crisis have also been extended until 30 June 2023.

Extension of reverse charge application The reverse charge mechanism is deployed by multiple countries as a means of regulating the VAT flow to tax authorities, by shifting the onus of paying VAT on to the buyer rather than the supplier. Doing so ensures the payment of VAT and it is therefore viewed as an effective fiscal measure to reduce tax evasion and, by extension, the VAT gap in a country. It is therefore unsurprising that several countries extend the scope of goods and services subject to the reverse charge application. Spain is no exception, who have now extended the application of the reverse charge to include scrap, plastics and material waste.

Spanish tax authorities release updated SII technical documentation The technical documentation of the Suministro Inmediato de Informacion (SII), otherwise known as Spain’s immediate electronic reporting system for VAT in Spain, has been updated by Spanish tax authorities.   Among the changes, adjustments have been made to benefit's margin by adding the value AJ in the register of issued invoices. The new validations and errors which come with this new code have also been implemented in this updated version. The amendments will be effective from 1 January 2023.    The documentation can be accessed via the following link:   https://sede.agenciatributaria.gob.es/Sede/procedimientoini/G417.shtml  

Introduction of Plastic Packaging Tax (PPT) We wanted to remind you that Spain’s Plastic Packaging Tax (PPT) is due to go live on 1 January 2023.  PPT in Spain is an excise duty imposed on non-reusable plastic packaging. It is levied on the manufacturing, intra—EU acquisition and importation of such packaging.    PPT in Spain will be charged at 0.45 Euros per kilogram.   PPT in Spain forms part of the taxable basis- this means that PPT will also be subject to VAT.   Suppliers are legally obliged to charge the tax, if applicable, to buyers. This means suppliers must communicate the amount of non-recycled plastic, any associated PPT and details of any exemptions, where applicable, to buyers.   Supplies, along with associated PPT, can be included in invoices- but this information can also be provided via a certificate in place of an invoice.    We are pleased to confirm that Tungsten has integrated the Plastic Packaging Tax as part of its service offering to our Spanish customers. Both our Web Form Suppliers and Integrated Suppliers can now successfully facilitate the inclusion of PPT in their invoices. We are communicating with our Spanish market in respect of the change.   Please refer to Law 7/2022 for further information around PPT in Spain.

Documentation for IT billing systems We previously communicated around Spain’s plans to utilise certified software systems to create legal invoice documentation in Spain. The certified software systems are referred to as VERI*FACTU systems.   The Spanish government has now provided some further information in respect of these systems, which outlines: 

• General information with respect to the billing computer systems requirement 
• Web Service Description 
• High billing record design 
• Void Billing Record Layout 

Tungsten is analysing the requirements, and more broadly considering the proposed Spanish e-invoicing mandate in line with the recent VAT in the Digital Age (ViDA) proposal and how we can assist our Spanish customers with the upcoming mandate. Note that Spain has not yet received derogation from EU. 

Introduction of new website tool Governments often endeavour to facilitate the process of validating fiscal-related information. To this effect, the Spanish tax authorities have included a tool which allows taxpayers to validate Spanish VAT numbers of companies operating intra-EU transactions. The link can be accessed here: Consultation Spanish intra-community VAT operators (agenciatributaria.gob.es)

Update on B2B mandatory e-invoicing Tungsten Network previously communicated on the Crea y Crece Law which introduced mandatory B2B e-invoicing in Spain. We can now confirm that the law has now officially published in the Boletín Oficial del Estado (the Spanish gazette). We are still awaiting further technical details of the mandate, which are currently at draft stage.

VAT gas reduction In view of the coming winter, combined with spiralling inflation, multiple governments across Europe are re-assessing gas and energy prices and reviewing VAT rates.  Spain has acted decisively to reduce the VAT rate, by reducing VAT on gas from 21% to 5%.   The measure is intended to last until the end of the year but may be extended.  Tungsten Network supports all valid rates for Spain as part of our Web Form solution and continues to monitor VAT rates in the country.  

Update on mandatory B2B e-invoicing On 15 September 2022, the Spanish Congress approved the Draft Law for creation and growth of companies (Crea y Crece Law). This law includes the obligation for Spanish taxpayers to mandatory invoice electronically for B2B transactions.   More information on the official statement is available here. 

Introduction of the plastic tax As seen earlier this year in April in the United Kingdom, and more recently in Italy this month, Spain is introducing a new plastic tax, effective from 1^st January 2023. This is in line with the recurring trend across Europe to introduce fiscal measures with a distinctly ‘green’ agenda. To this effect, the Spanish Congress has passed Law 7/2022 dated 8 April 2022. As in the United Kingdom and Italy, the underlying motivation behind this fiscal initiative is to encourage the reduction of non-reusable plastic, as well as promote the recycling of plastic waste. Key elements of the tax include:

• The tax applies to non-reusable plastic containers; products made of semi-finished plastic that will be used to create non-reusable packaging and plastic products that are used to close, trade, or display non-reusable containers
• These components will generally become taxable when delivered to the customer
• As in the United Kingdom, the tax is not set as a fixed percentage but is expected to be taxed at 0.45 Euros per kg.

Italy is also enacting similar legislation. Please refer to this month’s Italy compliance updates for further information.

Delay for certified software usage We have recently communicated on the e-invoicing landscape in Spain following some traction relating to the same in the country- which impacts both the invoice content itself, as well as Business-to-Business (B2B) transactions specifically. Spain has now announced that the creation of the legal artefact in Spain via certified software- also referred to as verifiable invoicing systems (VERI*FACTU) and used for the creation and submission of invoices- will now be delayed to 1 July 2024. The date was moved following a public consultation. From 1^st July 2024 there will also be voluntary submission of invoices to the Agencia Tributaria- sistemas y programos informaticos o electronicos (SIF). The proposed rules only apply to resident businesses. The proposed e-invoicing mandate in Spain is ambitious, with several complexities. Tungsten Network is closely monitoring the e-invoicing curvature in Spain and assessing our position regarding the certified billing software once more detailed information around the same is available.

Requirement for certified software Many countries require businesses to use certified software to produce the legal invoice in a country. Portugal is a good example. This means that Tungsten has had to adopt its ‘standard’ offering to customers. We do not create the legal invoice on behalf of suppliers in Portugal, but rather ask the suppliers to attach the legal invoice to our system. Similarly, Spain has announced that as of 1^st January 2024, only state or VERI*FACTU approved invoicing software may be used to prepare and submit invoices. Tungsten will need to assess the requirements the Spanish government has proposed for potential certified software providers from 1^st January 2024, when the changes are expected to take place. Tungsten Network is analysing these requirements and seeing how we can best support our Spanish market considering these new requirements. Tungsten Network is aware of the growing traction of e-invoicing in Spain. We are closely monitoring e-invoicing developments in the country.

Extension of reduction for VAT on electricity Rising electricity costs has been linked to the re-opening of the economy after Covid- 19. Recent events in Russia / Ukraine has also meant that supplies of natural gas from Russia have been interrupted. The Spanish tax authorities have responded to rising costs. The reduction in the VAT rate for electricity to 10% will be extended to 30 June 2022. At this point, the rate will revert to 21%.

Enhancement of administrative co-operation and tax information exchange in the EU on digital platform operators Countries are constantly motivated to make their tax processes more transparent and less cumbersome. To this effect, Spain has introduced the Directive on Administrative Cooperation (DA7). This will help to facilitate the exchange of information on income generated by sellers on digital platforms. Authorities can confirm when tax should be paid, but the automating of the process will result in less of an administrative burden on digital platforms.

B2B e-invoicing mandate developments Developments in the B2B e-invoicing sphere are gaining increasing momentum in Spain. Spain published a Royal Draft Decree on 21 February 2022 in respect of mandatory B2B e-invoicing in Spain. The draft decree outlines the obligations for taxpayers to comply with the mandate from 1 January 2024. Amongst the requirements outlined in the technical specifications are the requirements for invoices to include a specific hash. Spain is a key market for Tungsten Network. We are closely following B2B e-invoicing developments in Spain.

Plastic Tax developments Our recent compliance updates have shown a sharp increase in countries enacting legislation with a ‘green’ agenda. More specifically, we have seen the introduction of the Plastic Packaging Tax in the United Kingdom from 1 April 2022. Spain is now promoting a similar incentive. On 9 April 2022, Spain published Law 7/2022 on Waste and Contaminated Soils. This is being introduced to fight climate change and for the preservation of the marine environment. To achieve this, specifically, Spain is seeking to transpose the following 2 European EU Directives:

• Directive 2018/851, which aims to modify the Waste Framework Directive
• Single-Use Plastic Directive 2019/904, which aims to alleviate the environmental impact of certain plastic products.

Aligning with EU regulations is viewed as the most effective way to achieve these goals.

New invoicing regulations Spain has firmly communicated its intentions to overhaul its e-invoicing system significantly via the publication of a draft resolution published on 21 February 2022. This comes alongside the backdrop of an incentive to modernise the computer programs that support the accounting, billing and management of businesses across the country. Amongst the new requirements being proposed by the Spanish Ministry of Finance is the obligation to include QR codes and ID codes in Spanish invoices. The draft resolution does not specifically refer to B2B e-invoicing. A draft resolution to this effect was published in the summer of 2021 which extends the obligation for e-invoicing to all companies and freelancers in Spain. Both resolutions serve to illustrate the extent of the e-invoicing developments we can expect to see in Spain in the coming months, as Spain proposes to expand the scope of entities subject to mandatory e-invoicing, as well as introducing radical changes to the content of the invoice as well. It is no coincidence that these resolutions have been published relatively close together, underlining Spain’s motivation to harmonise its VAT-related operations and adopt a robust e-invoicing process.

Draft to introduce mandatory e-invoicing

Spain is making some strides with B2B e-invoicing, building on earlier work undertaken for B2G transactions. The draft law ‘Creation and Growth of companies’ is currently work in progress in the Spanish Parliament, awaiting final approval. Tungsten will keep you informed of any developments.

Draft law extending current B2G mandate to specific B2B transactions – public consultation open

Spain’s e-invoicing landscape looks like it may be expanding into the B2B sector, for transactions between companies and the self-employed

The Spanish government recently announced a draft law for ‘Creation and Growth of Companies’. This covers many elements- one being the proposal to extend the obligation to exchange invoices for B2B transactions as well as B2G transactions.

The public consultation for this is open until 6 September 2021.

Spain – Extension emergency zero-rate

In April 20’, the Spanish Government introduced a temporary zero VAT rate for purchases and imports by public entities, hospitals and other not-for profit organisations of surgical masks and sanitary products. This was due to expire on July 31 but has been extended to 31 October 2020 working retrospectively from the date the original derogation expired.

Spain extends B2G e-invoicing mandate

Spain has announced an extension of the existing B2G mandate to subcontractors involved in public contracts/tenders, effective from 1 July 2018.

Spain implements EU VAT Directive 55

The European Union (EU) VAT Directive 55 obliges all EU public authorities to receive invoices electronically, or at least to have a defined for how they will do so, by 27 November 2018.