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Miriam Sánchez González. 

VAT is a community tax

It is very important to point out that VAT is a Community tax, regulated by a Community regulation to which the laws of each of the member states that transpose it into national law must conform.
These are the different directives that regulate Value Added Tax which, in turn, have been interpreted by the Court of Justice of the European Union, verifying whether or not the laws issued by the member states of the European Union comply with the Directive.

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Principle of tax neutrality in VAT

In the field of Value Added Tax (VAT), the principle of tax neutrality is a cornerstone, ensuring that entrepreneurs and professionals do not bear the economic burden of the tax on their activities.
This principle, supported by the case law of the Court of Justice of the European Union (CJEU), holds that the taxable amount of VAT must correspond to the consideration actually received, allowing taxable persons to recover VAT on bad debts.

How is it applied in Spain?

Spanish legislation, however, has established strict requirements and tight deadlines for the recovery of VAT in situations of bad debts or bankruptcy, generating a barrier for companies that, for various circumstances, fail to meet these criteria in the stipulated time. This situation has raised significant doubts as to whether the national regulations are aligned with the VAT Directive and the case law of the CJEU, especially with regard to the principles of neutrality and proportionality.

What to expect, the turn of the Supreme Court

Recently, the Spanish Supreme Court has admitted two appeals challenging the restrictions imposed by the Spanish regulations, opening the door to a possible reinterpretation of the conditions for the modification of the tax base in cases of bad debts. These appeals seek to clarify whether the current limitations are contrary to the fundamental principles of harmonized VAT in the European Union.
The core of the issue lies in the possibility that the Supreme Court, relying on the case law of the CJEU, may overturn the restrictions that currently prevent or hinder the recovery of VAT in situations where time limits have been an insurmountable obstacle for businesses. This would mean a substantial change in practice, allowing many businesses to recover VAT on transactions where they did not receive the expected consideration, even if they did not initially comply with the formal requirements within the stipulated timeframe.

What did the CJEU say?

The argument is based on the interpretation of the VAT Directive by the CJEU, which has repeatedly emphasized the importance of the neutrality principle and criticized disproportionate restrictions that prevent businesses from recovering input VAT. In this context, the appeals admitted by the Supreme Court could pave the way for a more flexible and favorable application for businesses with respect to the modification of the VAT taxable base.

What to do if we have lost VAT quotas?

For companies that have so far been prevented from claiming VAT refunds for bad debts due to stringent deadlines and requirements, this situation represents an opportunity to reassess their possibilities. In light of recent developments, it is advisable for companies to review their cases with the support of professionals specialized in tax law, to identify whether they could benefit from a more favorable interpretation of the law, should the Supreme Court decide in line with the CJEU case law.
This moment of legal uncertainty could therefore become a window of opportunity for many companies to recover VAT previously considered irrecoverable. It is crucial for affected companies to keep abreast of developments and consider acting on the outcome of these appeals.


As we await the Supreme Court’s decisions, it is essential that businesses assess their situation and prepare to act quickly, depending on how the case law evolves.
The possibility of the current restrictions being overturned or modified could mean a significant change in VAT recovery for many businesses, providing welcome financial relief and reinforcing the principle of tax neutrality that underpins the VAT system in the European Union.

We can help you

At Cigarrán Abogados we are anticipating the situation, foreseeing that the eventual decision of the Supreme Court will allow the recovery of VAT on commercial transactions that are close to expiring.

¿Necesita ayuda? En Cigarrán Abogados podemos ayudarte (+34) 91.355.85.15

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