A couple of years ago, in an article on this blog , we addressed the problems that Spanish businesses face when trying to register on the EU VAT database (VIES). Sadly, nothing has improved to date.
To recap, a business that registers for VAT in Spain is not automatically registered on the VIES, as is the procedure in other EU countries. The Spanish Tax Office insists on a separate application being made and the taxpayer being subject to an inspection before approval is given. Often a Tax Office inspector will turn up at the registered address of the business without notice, and if there is no-one there (quite possible for a work-from-home sole-trader) then the approval process will be put on ice, delayed for months, or be rejected.
We ask ourselves, what is the reasoning behind this extra layer of bureaucracy from the Spanish authorities ? We can only think that it is some misplaced attempt to prevent VAT fraud, and to check that the business is a bona fide one before allowing it on the EU VAT database. Although other more enlightened and streamlined administrations such as the UK and France do not have such a procedure- in these countries, as soon as the business has a local VAT number, it is added to the VIES.
The damage done to the competitiveness of Spanish businesses is significant. If a Spanish business purchases goods or services from a supplier in another EU country, the supplier will often do a check on the VIES database and if their client does not appear then they may insist on charging local VAT. Due to the difficulties and further bureaucracy of claiming foreign VAT back via the Spanish Tax authorities, this VAT may never be recovered and represent an extra cost for the Spanish business. Especially in markets where margins are narrow, this extra expense could make the difference between success and failure.
So once again we say to the Spanish authorities: cut the bureaucracy and add new businesses to the VIES as soon as they register for VAT !
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