One ongoing challenge for businesses and the self-employed in Spain is balancing their cash flow and tax responsibilities. Delays in customer invoice payments make finding this balance especially challenging. When professionals need to complete their value-added tax (VAT) self-assessment, they sometimes have to pay an amount they haven’t yet received.
This leads to a lack of cash flow and creates many obstacles for businesses, often forcing them to take out loans to cover advance tax payments. Recognizing this issue, the Spanish authorities introduced Law 14/2013, which established the special cash basis regime (RECC). We’ll explain more about RECC in the following sections.
What’s in this article?
- What is the special cash basis regime, and what is it for?
- What are the pros and cons of the special cash basis regime?
- Who is eligible for the special cash basis regime?
- What are your obligations under the special cash basis regime?
- Which transactions are subject to the special cash basis regime?
- How does the special cash basis regime work?
What is the special cash basis regime, and what is it for?
The special cash basis regime (RECC, from the Spanish “régimen especial del criterio de caja”) is an optional VAT system that lets businesses and self-employed workers delay paying VAT on unpaid invoices.
By using the RECC, businesses can avoid paying VAT out of their own pockets and can delay payment until one of the following situations happens:
- Invoice collection: VAT becomes due when the business receives payment from the customer. This applies regardless of whether the amount is collected in full or in part; in the case of partial payment, VAT due corresponds to the amount collected.
- The end of the tax period immediately following the issuance of the invoice: If the customer hasn’t paid by the end of the year after the issue date on the invoice, the Agencia Tributaria (Spanish Tax Agency) considers the seller responsible for the VAT payment. For instance, if a business issued an invoice on September 23, 2024, it owes that VAT by December 31, 2025—even if the customer still needs to pay.
What are the pros and cons of the special cash basis regime?
The RECC offers several benefits to businesses and self-employed workers who act as collection agents:
- You can temporarily defer your VAT payments.
- You reduce your need to request VAT recovery on unpaid invoices.
- Self-employed workers or businesses can, therefore, optimize their cash flow.
While these benefits are significant, some choose not to use the RECC, even if they qualify, because there are also some drawbacks:
- You can’t deduct or claim VAT refunds on purchases until you’ve paid your invoices.
- You must meet several formal obligations, which we will examine later.
Who is eligible for the special cash basis regime?
Only businesses and self-employed workers who meet the following requirements can opt for the RECC:
- The total value of transactions in the prior year must not exceed €2 million.
- Collections from a single customer must not exceed €100,000 in the last year.
If you meet both conditions and want to use the RECC, complete Form 036 or 037 to apply. You must request voluntary registration when starting your business activity or, if your company is already operating, during December of the year before the fiscal year. For example, to register for the RECC in 2025, you need to submit one of the forms in December 2024.
What are your obligations under the special cash basis regime?
Businesses and self-employed individuals who opt for the RECC must meet specific obligations to benefit from this special VAT regime:
- Complete Form 303 for the quarterly VAT return, including all transactions where VAT is accrued under the RECC. Even if VAT isn’t due on unpaid invoices, you must still include the information for reporting purposes.
- Keep a record book that includes issued invoices along with the following details: the dates when the transactions were collected, the methods used for collection (e.g., bank account number), and the total amount.
- Keep a record book that includes received invoices along with the following details: the dates when the payment transactions were made, the payment methods used, and the total amount.
- Mention the RECC on invoices for transactions that fall under this regime.
- If you are required to use the Immediate Supply of Information (SII), enter code “07” to register the transactions.
Regardless of whether you use the RECC, you will still need to manage your daily tax obligations. To make these processes easier, consider adding a tax automation tool such as Stripe Tax to your payment system. Aside from automating VAT calculation and collection on your invoices, Stripe Tax ensures the correct tax rate applies by staying updated with the latest tax laws in over 50 countries where it is available. Be sure to check the list of excluded territories.
Which transactions are subject to the special cash basis regime?
The RECC applies to all transactions within the VAT-applicable territories of Spain and, therefore, excludes the Canary Islands, Ceuta, and Melilla. Additionally, transactions fall under the RECC whether the recipient is an end customer (using the product or service directly) or a reseller. However, certain transactions are excluded from the special cash basis regime:
- Intracommunity exports, acquisitions, and deliveries—meaning transactions between two EU member countries.
- Imports and transactions treated as imports.
- Transactions where the VAT responsibility is reversed, meaning the purchaser is responsible for the VAT obligations.
- Self-consumption transactions, regardless of whether they are goods or services.
- Transactions under the following regimes:
How does the special cash basis regime work?
To better understand how the RECC works, let’s look at two examples from different circumstances:
A business issuing an invoice under the RECC
- A business that meets the specified requirements listed above decides to adopt the RECC and indicates this on Form 036.
- In 2024, the business sells a service to another company for €10,000, which totals €12,100, including 21% VAT. When the transaction is completed, the company issues an invoice indicating that it is part of the RECC and then records it in its issued invoices register.
- Two months after the sale, the business that purchased the service pays 60% of the invoice, which amounts to €7,260 (€6,000 plus VAT).
- The seller needs to pay the AEAT for the VAT on the €6,000 they’ve already received from their customer (that’s €1,260 under the general VAT rate). They won’t need to pay the VAT on the remaining 40% until the customer pays the rest of the debt or until the end of the following year.
- Unfortunately, by December 31, 2025, the customer still hasn’t paid their debt. On this date, the RECC benefit ends, and the company that provided the service must pay the €840 VAT on the unpaid portion of the invoice (21% of the remaining €4,000).
A self-employed individual under the general regime who receives an invoice that falls under the RECC
- The self-employed individual is subject to the general VAT regime.
- In 2024, they contract services from a business that operates under the RECC.
- The business notifies the self-employed individual that the issued invoice is subject to the RECC obligations.
- Three months later, the self-employed individual pays the invoice in full, allowing them to deduct the VAT at that time.
- In the book of received invoices, the self-employed individual records the total amount paid, the payment method, and the date. Additionally, they indicate that the invoice paid was subject to the RECC.
The RECC can be helpful for many businesses, as long as they meet the several requirements to register for this voluntary regime.
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