Spain has presented a draft for State‘s Budget Law for 2023. Among other updates, the draft includes some changes to the VAT law related to the reverse charge mechanism and debt relief rules. The proposed amendments aim to update the Spanish VAT law so that it is better aligned with European legislation.
It is proposed to extend the domestic reverse charge mechanism so that the supplies of plastic waste and textile materials are included, even if they are provided by non-established companies.
At the same time, there is a proposal to exclude the supplies related to immovable property, such as rental services by non-established entities, from the reverse charge mechanisms unless they register for VAT. Intermediary services for rentals provided by non-established suppliers would also fall under the provision. This means that if the changes come into place, foreign entities would start charging VAT on property rentals and related representation services in Spain. Naturally, such entities would have to register for VAT.
It is stated that such changes would simplify VAT recovery for foreign taxpayers—by making input VAT recoverable in the foreign entities' VAT returns. Currently, such businesses do not need VAT registration and cannot return VAT paid in Spain.