Special regime of the cash basis [Model 036]

Law 14/2013, through its article 23, creates, within the scope of Value Added Tax, the special regime of the cash basis. The wording given to the provisions of Law 37/1992, of December 28, on Value Added Tax, which contains the aforementioned article 23, takes effect from January 1, 2014.

The possibility of adopting this special regime is contained in article 167a of Council Directive 2006/112/ EC of 28 November 2006 on the common system of value added tax, a provision that has been applicable since 1 January 2013.

The new Community regulation allows Member States to establish an optional regime, known as the double cash criterion, for taxpayers whose volume of operations does not exceed 2,000,000 euros, a regime according to which taxpayers may opt for a system that delays the accrual and subsequent declaration and payment of the VATcharged on the majority of their commercial operations until the time of collection, in whole or in part, from their clients, with the deadline of December 31 of the year immediately following the one in which they were carried out.

However, in order to avoid situations that could encourage delays in the fulfilment of their own commercial obligations, Community regulations establish that taxpayers will also see the deduction of VATincurred on their purchases delayed until the time when they make payment for these to their suppliers, and with the same limit of December 31 of the year immediately following the year in which the operations were carried out.

The new optional special regime for the taxpayer will determine its application for all its operations, with some exceptions such as intra-community operations and those subject to other special tax regimes.

Finally, the accrual of the transferred quotas and the deduction of the quotas incurred with respect to the operations to which the special regime has been applied, which were still pending accrual or deduction in the cases of bankruptcy and modification of the tax base due to uncollectible credits, are also foreseen.

Subjective requirements for the application of the special cash basis regime

In accordance with article 163 decies of Law 37/1992, taxpayers whose volume of operations during the previous calendar year did not exceed 2,000,000 euros may apply the special cash-basis regime.

When the taxpayer had started carrying out business or professional activities in the previous calendar year, the amount of the volume of operations must be increased to the year.

When the taxpayer has not started carrying out business or professional activities in the previous calendar year, he may apply this special regime in the current calendar year.

For the purposes of determining the volume of transactions carried out by the taxpayer referred to in the preceding paragraphs, they shall be deemed to have been carried out when the accrual of Value Added Tax occurs or, where applicable, has occurred, if the special cash basis regime has not been applied to the transactions.

Taxpayers whose cash collections from the same recipient during the calendar year exceed the amount determined by regulation will be excluded from the cash regime.

Conditions for the application of the special cash basis regime

In accordance with article 163 undecies of Law 37/1992, the special regime of the cash basis may be applied by taxpayers who meet the requirements established in the previous article of this Law and choose to apply it under the terms established by regulation.

Option for the special cash basis regime

Royal Decree 828/2013, of October 25, 2013, has modified the Value Added Tax Regulations approved by Royal Decree 1624/1992, of December 29.

Article 61 septies of the VAT Regulation establishes the following regarding the option to apply the special cash basis regime:

1. The option referred to in article 163 undecies of the Tax Law must be exercised at the time of submitting the declaration of commencement of the activity, or during the month of December prior to the beginning of the calendar year in which it must take effect, and is understood to be extended for the following years as long as there is no waiver of the same or exclusion from this regime.
2. The option must refer to all operations carried out by the taxpayer that are not excluded from the special regime in accordance with the provisions of section two of article 163 duodecies of the Tax Law.

Waiver of the special cash basis regime

For its part, article 61 octies of the VAT Regulation provides that the waiver of the special regime shall be exercised by means of communication to the competent body of the State Tax Administration Agency, by means of presenting the corresponding census declaration and must be formulated in the month of December prior to the beginning of the calendar year in which it must take effect. The resignation will be effective for a minimum period of three years.

The revocation of the resignation will be carried out within the same period as the resignation.

Exclusion from the special cash basis regime

Taxpayers who have opted to apply this special regime will be excluded from it (Article 61 nonies) when their volume of operations during the calendar year has exceeded 2,000,000 euros.

When the taxpayer has started carrying out business or professional activities in the calendar year, this amount will be increased to the year.

Taxpayers whose cash collections from the same recipient during the calendar year exceed the amount of 100,000 euros will be excluded from the special cash-basis regime.

The exclusion will take effect in the year immediately following the year in which the circumstances determining it occur. Taxpayers excluded for these reasons, who do not exceed the aforementioned limits in successive years, may again opt to apply the special regime under the terms indicated in article 61 septies of the VAT Regulation .

According to article 163 quaterdecies of the VAT Law , the waiver or exclusion of the application of the special cash-basis regime will determine the maintenance of the rules regulated therein with respect to the operations carried out during its validity in the terms indicated in the previous article of said Law.

Deregulation in the special cash basis regime

The taxpayer will be deregistered from the special cash-basis regime when any of the following circumstances occur:

• the drop in the activity or activities covered by this regime
• resignation from the regime
• exclusion from said regime.

Objective application requirements

In accordance with article 163 duodecies of Law 37/1992, the special regime of the cash basis may be applied by the taxpayers referred to in article 163 decies to the operations that are deemed to be carried out in the territory of application of the Tax.

The special regime of the cash basis will refer to all operations carried out by the taxpayer, without prejudice to the fact that the following operations are excluded from the special regime of the cash basis:

1. Those pursuant to special simplified regimes for agriculture, stockbreeding and fishing, equalisation tax, gold as an investment, applicable to services rendered electronically and from the group of companies.
2. Deliveries of goods exempt from those referred to in articles 21, 22, 23, 24 and 25 of the VAT Law .
3. The intra-Community acquisitions of goods (within the EC).
4. Those in which the taxpayer is the businessperson or professional for whom the operation is carried out in accordance with numbers 2, 3 and 4 of section one of article 84 of the VAT Law .
5. Imports and operations similar to imports.
6. Those referred to in articles 9.1 (self-consumption of goods) and 12 (operations similar to the provision of services) of the Law.

Contents of the special cash basis regime

In accordance with article 163 terdecies of Law 37/1992, in the operations to which this special regime is applicable, the Tax will be accrued at the time of total or partial collection of the price for the amounts actually received or if this has not occurred, the accrual will occur on December 31 of the year immediately following the year in which the operation was carried out.

For these purposes, proof must be provided of the time of collection, in whole or in part, of the price of the transaction.

The impact of the Tax on the operations to which this special regime is applicable must be carried out at the time of issuing and delivering the corresponding invoice, but it will be understood to have occurred at the time of the accrual of the operation determined in accordance with the provisions of the previous section.

Taxpayers to whom this special regime applies may make their deductions under the terms established in Title VIII of the VAT Law , with the following particularities:

1. The right to deduct the fees borne by taxpayers covered by this special regime arises at the time of full or partial payment of the price for the amounts actually paid, or if this has not occurred, on December 31 of the year immediately following the year in which the transaction was carried out. The above will apply regardless of the time at which the taxable event is deemed to have occurred. For these purposes, proof must be provided of the time of payment, in whole or in part, of the price of the transaction.
2. The right to deduction may only be exercised in the declaration-settlement relating to the settlement period in which the right to deduct the incurred contributions arose or in successive periods, provided that the period of four years has not elapsed, counted from the date of the birth of the aforementioned right.
3. The right to deduct the incurred contributions expires when the holder has not exercised it within the period established in the previous letter.

The formal obligations that must be fulfilled by taxpayers applying this special regime will be determined by regulation.

Operations affected by the special cash basis regime

In accordance with article 163 quinquiesdecies of the VAT Law , the right to deduction for taxpayers not covered by the special cash-basis regime, but who are recipients of operations included therein, arises in relation to the quotas borne by these operations, at the time of full or partial payment of the price thereof, for the amounts actually paid, or, if this has not occurred, on December 31 of the year immediately following the year in which the operation was carried out.

The above will apply regardless of the time at which the taxable event is deemed to have occurred.

For these purposes, proof must be provided of the time of payment, in whole or in part, of the price of the transaction.

The formal obligations that must be fulfilled by taxpayers who are recipients of operations affected by the special cash-basis regime will be determined by regulation.

The modification of the tax base referred to in section four of article 80 of the VAT Law , carried out by taxpayers who are not covered by the special cash-basis regime, will determine the birth of the right to deduct the quotas borne by the debtor taxpayer, covered by said special regime corresponding to the modified operations and which were still pending deduction on the date on which the aforementioned modification of the tax base is carried out.

Specific registration obligations

According to article 61 decies of the VAT Regulation , taxpayers subject to the special cash-basis regime must include the following information in the register of invoices issued referred to in article 63 of the aforementioned Regulation:

1. The dates of partial or total collection of the transaction, with a separate indication of the corresponding amount, where applicable.
2. Indication of the bank account or means of payment used, which can prove partial or total collection of the transaction.

Taxpayers subject to the special cash-basis regime, as well as taxpayers not subject to the special cash-basis regime but who are recipients of the operations affected by it, must include the following information in the register of invoices received referred to in article 64 of the VAT Regulation :

1. The dates of partial or total payment of the transaction, with a separate indication of the corresponding amount, if applicable.
2. Indication of the payment method by which the partial or total amount of the transaction is paid.

Specific billing obligations

In accordance with article 61 undecies of the VAT Regulation , for the purposes of the provisions of article 6 of the Regulation governing invoicing obligations, approved by Royal Decree 1619/2012, of November 30, all invoices and their copies issued by taxable persons under the special cash-basis regime referring to operations to which the same is applicable, shall contain the mention of “special cash-basis regime”.

For the purposes of the provisions of article 11 of the Regulation governing invoicing obligations approved by Royal Decree 1619/2012, of November 30, the invoice for operations subject to the special cash basis regime must be issued at the time of their performance, except when the recipient of the operation is a businessman or professional acting as such, in which case the invoice must be issued before the 16th of the month following the month in which the operations were carried out.

Effects of the bankruptcy declaration order

In accordance with article 163 sexiesdecies of Law 37/1992, the declaration of bankruptcy of the taxpayer subject to the special cash-based regime or of the taxpayer who is the recipient of its operations will determine, on the date of the bankruptcy declaration order:

1. the accrual of the fees passed on by the taxpayer under the special cash-basis regime that were still pending accrual on that date;
2. the birth of the right to deduct the quotas borne by the taxpayer with respect to the operations to which he has been the recipient and to which the special cash basis regime has been applied that were pending payment and in which the period provided for in article 163.terdecies has not elapsed. Three, letter a), on said date;
3. the birth of the right to deduct the fees borne by the bankrupt taxpayer under the special cash-basis regime, with respect to the operations to which he has been the recipient and which have not been covered by said special regime and which are still pending payment and in which the period provided for in article 163.terdecies has not elapsed. Three, letter a), on said date.

The taxpayer in bankruptcy must declare the accrued contributions and exercise the deduction of the contributions incurred referred to in the previous paragraphs in the declaration-settlement provided for by regulation, corresponding to the taxable events prior to the declaration of bankruptcy. Likewise, the taxpayer must declare in said declaration-settlement, the other supported quotas that were pending deduction on said date.