Have you ever thought about buying or selling products and/or services in another country belonging to the European Union? To do so, you should know that registration in the Register of Intra-Community Operators is a basic requirement to be fulfilled.
In the Tax Consultations I receive, both from regular and potential clients, this represents a very frequent topic. Especially when it comes to digital businesses.
Even if your initial intention is not to sell outside the Spanish territory… you may not be aware that you have suppliers that do not have tax residence here. To give you basic examples: Facebook, Google, some Amazon sellers or even your hosting provider.
Do you know how they affect your tax obligations?
…And with the economics of your business?
Let’s go step by step and I will solve all your doubts…
What are intra-community transactions?
These are purchases or sales made with suppliers or customers that are located in another member state of the European Union. If you are in doubt about which countries belong to the EU, you can check at this link.
These operations are exempt from VAT (according to EU VAT regulations), provided that certain conditions are met, the first being that both the seller and the buyer are professionals or companies registered in the Register of Intra-Community Operators (ROI), also known as VIES file.
The Registry of Intra-Community Operators (ROI) is a large database where professionals and companies from all EU member countries are registered. As it happens with the Census Registration with the Tax Authorities, where the beginning of an activity is communicated, the same happens with this Registry. An application must be submitted, indicating the registration in this census database.
Is registration in the Register of Intra-Community Operators mandatory?
The obligation depends on the fiscal approach and the obligations you acquired when you initially registered with the tax authorities with the activity. For these operations to be considered VAT exempt, the registration of both parties (supplier-customer) is mandatory.
For example, if your activity is considered VAT exempt, registration is not compulsory, since no VAT settlements are made.
But if your activity is subject to VAT, and you file a quarterly form 303 to settle the VAT, it is mandatory.
How do I apply for registration in the Register of Intra-Community Operators(ROI)?
It is processed by means of Form 036, from the Electronic Headquarters of the Tax Agency and it is indicated from which date the operations begin.
It can be requested with the initial registration of the activity, or later. The difference is that when requesting the registration with the registration of the activity, this procedure is consolidated.
Otherwise, you have to wait for the Tax Authorities to confirm the registration and the assignment of the VAT number. In some occasions it may ask for additional information to confirm the registration in the ROI.
What is the VAT Number?
This number is the one that will confirm your registration in the ROI, and will be the one that will identify you to your suppliers and/or customers in the EU.
You will have to substitute a DNI/NIE/CIF for this number, which is none other than your own DNI/NIE/CIF with the letters ES in front (identifying professionals and companies with tax residence in Spain).
From the moment you have it, the VAT exemption is applicable and you can invoice your EU customers without VAT. And also, by providing this number to your EU suppliers, they will be able to issue you the invoice without VAT.
If you have doubts, or you want to make an inquiry about whether someone is registered in the ROI, you can do it from this link.
What are the implications of performing Intra-Community Transactions?
The exemption has been established to simplify tax (VAT) liquidation procedures; however, these operations are controlled to a certain extent by the Public Administration.
This implies the obligation on the part of the Spanish businessman, if he carries out purchase and/or sale operations within the EU, to present the Form 349 where he reflects the information regarding the other party (supplier and/or client) and the amounts of the purchases and/or sales.
The same information must be transferred in form 303 for the same period.
If more than one year has passed without any operations having been carried out, and therefore no returns have been filed, it is very common for the Tax Agency to send a notification in which it requests the professional/company to process the deregistration. This is done in the same way that the Registration was requested, with the difference that the option “Deletion” is marked.
On other occasions, it is the Tax Agency itself that manages such cancellation ex officio.
If you are ever in doubt as to whether you are still in the Registry, I recommend that you confirm it through the link above. You may be in for a surprise, especially if it has been a long time since your last purchase or sale.
When do I file Form 349?
The form can be filed on a quarterly basis when neither during the reference quarter, nor in each of the four previous calendar quarters, the total amount of the transactions (delivery of goods and/or services excluding VAT) exceeds €50,000.
Otherwise it would have to be submitted on a monthly basis.
Filing deadlines are the usual ones: from April 1 to 20 for the months of April, July and October. And from January 1 to 30 for when the fiscal year closes.
In the case of monthly settlements, the deadline is: from the 1st to the 20th month following the month in which the tax return is to be filed.
It is important to emphasize that only transactions with other companies are presented. In the case of sales to individuals, they are not included. And as all the Declarations, if they are not presented within the stipulated term, they entail a sanction.
How does it affect the company’s economics?
At all times we have talked about VAT and how this rule affects the liquidations that the self-employed or companies have to make. And it has other fiscal and therefore economic implications.
The first is that if you have a European expense (EU supplier), and in order to be recognized as such and avoid misunderstandings with the tax authorities, it would be advisable that you are registered in the ROI.
Remember that deductible expenses are those related to the activity performed (professional or business). If you want to know more about them, download for free the Guide to Deductible Expenses.
On the other hand, if you do not register with the ROI, your supplier is obliged to issue you a VAT invoice, and you will not be able to deduct the VAT.
You will be able to recover it, requesting the return of the amount to the Treasury of the country in question. Action that takes time, and probably money.
I hope you have found all the information interesting and useful. Remember that you can count on the Services that Asesoría y Consultoría Fénix offers, and in case you want to clear up any doubts, I will always recommend you a 1:1 Consultation since it is focused on your particular case.
The regulations are very broad and that is why the information that is usually found is very generic.
With personalized service you get clarity and certainty!
Thank you for making it this far, and I encourage you to share your experience below – you can help more people with it!
