Spain’s New VAT Bad Debt Relief Rules Remain Open to Challenge

Spain relaxed its restrictions on VAT relief for customer default in 2023, but the new rules may not go far enough to meet EU requirements and are therefore open to taxpayer challenge.

The importance of bad debt relief stems from a mismatch between the time when suppliers must remit VAT to tax authorities and the time they receive it from recipients, which is often much later. Suppliers generally remit VAT to the tax authorities in the period of invoicing. The supplier then collects VAT from the customer to preserve “neutrality,” the EU legal principle that the final customer, rather than ...