Deductible VAT Before Registering as a Freelancer in Spain
Tax Agency (Hacienda)
Many of our customers ask the question: “Can I deduct VAT on purchases or expenses acquired before the registration date?” The answer that the TEAC (Central Administrative Economic Court) gives us in its resolution of 01-26-2017 is yes, although we must take into account certain precautions that we tell you below.
You may be thinking of starting an economic activity. However, you are not going to provide services or sell goods yet. You are organizing your company, locating the best suppliers, and contacting future clients. All these steps without earning a penny, rather the opposite, spending the few savings you had available.
Now you are wondering if you can buy goods or services with dates before the official registration date. You may think that the more you stay without registering, the less Social Security payments you will have to spend.
To be able to deduct the VAT from expenses and purchases made before the start date, it is enough to demonstrate that you intended to start the activity.
What are the means of proof that the Tax Agency allows to prove that intention?
1. You had requested the authorizations and licenses that you require for the operation of your activity.
2. The goods and services received are related to your business.
3. You have submitted a 036 form before the start of operations (pre-registration).
4. The time elapsed between the purchase of goods and services and the start of the activity is reasonable.
If we stick to what TEAC has stated, it is enough that you demonstrate the intention to start an activity. That means that it is not necessary to carry it out.
What if it turns out that you acquire merchandise for resale because you are going to sell household appliances? And it turns out that you couldn’t finally make a sale?
Does the failure of your business mean that you lose the right of deduction of VAT on merchandise purchases? According to TEAC no, it doesn’t, but as long as you can prove that you intended to start that activity.
In practice, what truly important is to designate the goods or expenses to the business that you are going to start, not buying them too early and not acquiring goods that you can use privately.
In the latter case, what you should try is to make changes to the goods that help you demonstrate their business use.
Let’s see it with an example: in the case of vehicles, put a vinyl with the company logo as soon as you buy it. Then document it with the invoice of the supplying company and photos of the vehicle.
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