Value-added tax (VAT), commonly known as EU VAT, is a widespread tax paid by companies in Spain and other European Union countries. While some transactions are exempt from VAT, most sales of both products and services require it.

VAT is an indirect tax that a business collects from customers during each sale. The business then pays the total collected tax to the Agencia Tributaria (the Spanish Tax Agency) in one lump sum.

Before discussing the potential result of the VAT return, we need to explain the terminology that the Agencia Tributaria uses to distinguish between VAT paid and VAT collected. “Output VAT” refers to the sales tax a business collects from its customers. “Input VAT” refers to the VAT a business pays on the goods and services it purchases for business operations. Sometimes, when filing a VAT return, the difference between output and input VAT is negative, meaning the business has paid more VAT than it has collected. In this case, the Agencia Tributaria owes the difference to the business. When this occurs, the business can choose either a VAT offset or a VAT refund. In this guide, we will examine the VAT refund option in depth, including its implications for your business and its advantages and disadvantages compared to VAT offsetting.

Note: Although we often refer to “the company” and “the business” in this guide, the VAT refund process is the same regardless of the business’s legal structure. In other words, the VAT refund rules apply the same whether you’ve set up a company (what in Spain would be known as a “sociedad”) or are a self-employed individual (what in Spain would be known as an “autónomo”).

What’s in this article?

• What is a VAT refund?
  
• Deadlines for VAT refunds in Spain
  
• How to apply for a VAT refund step by step
  
• How to find the status of your VAT refund
  
• Offsetting: The alternative to a VAT refund
  

What is a VAT refund?

A VAT refund is a process managed by the Agencia Tributaria for companies in Spain to recover surplus VAT (the amount overpaid during the last tax period). Because companies collect VAT using a set calculation, sometimes they might have collected less from their customers than they paid for the products or services needed for their business operations. Thus, they are entitled to a refund.

In short, if you have paid more VAT than your company has collected, the Agencia Tributaria must refund the excess amount to you. Alternatively, you can request an offset for that amount, as we will discuss later.

Deadlines for VAT refunds in Spain

When discussing VAT refund deadlines in Spain, it’s important to distinguish between two separate procedures. The first is the application process, which the business handles. The second is the refund process itself, which the Agencia Tributaria carries out once the initial application is approved.

Applying for a VAT refund

The application for the VAT refund must be processed between January 1 and January 30, coinciding with the VAT return for the fourth quarter, which you submit using Form 303 (detailed step-by-step instructions on this are in the next section). If you don’t request your refund during this period, you will have to wait until the next fiscal year to apply again.

Prior to a December 23, 2010 ruling by the Spanish Supreme Court, there was a concern among many companies in Spain that if they did not request a refund during VAT self-assessment, they would have only four years to complete the procedure. The concern was that after this period, they would lose the chance to claim the amount owed. However, the 2010 ruling established that the expiration only applies to VAT offsets, not to refunds.

Refunds

The company must receive the refund within six months from the last day on which the VAT self-assessment for the fourth quarter can be filed, which is currently January 30. In other words, the Agencia Tributaria is obligated to process the refund by July 30. If the refund is not processed by that date, and as long as the delay is due to the Agency itself, the Agencia Tributaria must pay late payment interest—without the business needing to claim it.

How to apply for a VAT refund step by step

While the process for a VAT refund is not overly complicated, it is less intuitive than requesting a VAT offset. To simplify the process, we have prepared a step-by-step guide to help you recover the amount of VAT you overpaid.

1. Download Form 303 in PDF format from the Agencia Tributaria website and file it electronically. You’ll need to identify yourself using your Cl@ve PIN, DNIe, or digital certificate. If you prefer to submit it in person, visit an Agencia Tributaria office.
   
2. Fill out the boxes as described in the quarterly VAT return guide.
   
3. To determine if the result of the self-assessment is negative and you are entitled to a VAT refund, check Box 71. If the figure is negative, go to Section 6 of Form 303.
   
4. In Box 73, enter the amount to be refunded by the Agencia Tributaria. To allow the transfer, provide your bank account’s SWIFT, BIC, and IBAN codes in the boxes below.
   
5. Fill out the rest of the boxes as usual for a VAT self-assessment and file the tax form. Once this is done, you will have applied for the VAT refund.
   
6. The Agencia Tributaria has six months to validate your application and process the refund, provided all the information you have submitted is correct.
   

To ensure you have always charged the proper amount of VAT on your transactions and to simplify the filing process, it’s worth using a tax automation tool such as Stripe Tax. In addition to automatically calculating and collecting VAT on your sales, Stripe Tax allows you to generate reports on your collected taxes, making it easy to check if you are due a refund. Stripe Tax is also regularly updated to ensure you continue to charge the correct amount of tax in the 50+ countries where it is available, even when regulations are updated and tax rates change (see our list of excluded territories).

How to find the status of your VAT refund

To see the current status of your VAT refund, go to your personal page on the Agencia Tributaria web portal and click on “Mis expedientes” (“My procedures”). You can only view the information if you or a proxy have previously identified yourselves for the process. In addition to the processing status, other relevant information will also be displayed.

• Applicant: You will be able to see the name of the individual or legal entity by clicking on the link on the right side.
  
• Fiscal year: Fiscal year for which the VAT refund has been requested.
  
• Procedure: Identifier code for the procedure you are querying the status of.
  
• Department in charge: The agency department responsible for processing the VAT refund.
  
• Procedure history: The tax form you used to request the VAT refund. The link to this document appears next to the date on which you submitted the form electronically.
  
• Processing status: Information on the current status of the VAT refund. Often, for a few months (usually less than half a year), you will only see the following message: “Su expediente se está tramitando” (Your application is being processed). If the data is correct, the processing status will eventually change, and a message will appear informing you that the Agencia Tributaria has accepted the request, and will process your refund.
  

Offsetting: The alternative to a VAT refund

If the VAT return shows a negative result, you do not have to request a refund. If you prefer, you can choose to request an offset in your next returns. This means that if a future return shows a positive result, the amount that the Agencia Tributaria did not refund you previously will be deducted from that amount.

Keep in mind that you have four years to choose between requesting a VAT refund or offsetting. If you are unsure which option to choose, we have outlined the pros and cons of each to help you make a more informed decision.

Pros of VAT offsetting

• From an administrative standpoint, the process is much simpler and faster.
  
• It is beneficial during periods of high turnover when you collect a lot of VAT. For example, if your business is seasonal, applying for VAT offsetting can save you from making a large payment after the quarter when most of your income is concentrated.
  

Cons of VAT offsetting

• If four years pass without applying for VAT offsetting, you cannot ask the Agencia Tributaria to offset the surplus in the future.
  
• The surplus is not directly recovered but is put toward future returns to reduce the VAT you pay.
  

Pros of VAT refunds

• The surplus is directly recovered through a transfer made by the Agencia Tributaria.
  
• Ongoing VAT self-assessments are simpler: since the accumulated amount will already have been refunded, you won’t need to specify amounts to be offset, resulting in less paperwork (this advantage is especially obvious with monthly refunds).
  

Cons of VAT refunds

• As mentioned earlier, the Agencia Tributaria typically takes a few months to process VAT refunds.
  
• Except for very exceptional cases where the requirements for monthly VAT refunds are met, you can only process a refund during your fourth quarter return between January 1 and January 30.
  
• A VAT refund can only be granted if previous quarters of the same year have also shown a negative result.
  
• In some cases, applying for a VAT refund may lead to the Agencia Tributaria conducting an inspection of the business. It is important that the data submitted when applying for the VAT refund is completely accurate to avoid issues in such cases.
  

Clearly, offsetting has fewer disadvantages compared to a VAT refund. Even so, many companies in Spain still opt for a VAT refund, especially if they usually have higher input than output VAT, are ending their business operation, or want better control of their financial capacity.