VAT refund without justification of payment

In a resolution dated 27 September 2024, the Central Economic-Administrative Court analysed the burden of proof in the special VAT refund scheme for entrepreneurs or professionals who are not established in the Territory of Application of the Tax (TAT), but who are established in the European Union, the Canary Islands, Ceuta or Melilla. In accordance with Article 119 of Law 37/1992 of 28 December on Value Added Tax (hereinafter referred to as ‘LVAT’), these individuals can apply for a refund of tax paid on the acquisition or import of goods or services in the TAT, provided that they meet the conditions set out in Article 119 of the LVAT for the relevant period. 

In summary, the requirements are as follows: 

• Not carrying out transactions subject to VAT in the TAT, except: 

• • Transactions in which the recipient is the taxable person. 

• • Transport and related services exempt from VAT. 

• Not being the recipient of transactions for which they must act as a taxable person. 

•  Complying with VAT deduction requirements, especially those set out in Articles 95 and 96 of the LVAT. 

•  Using goods and services acquired in transactions that give the right to deduct, in accordance with the regulations of the country in which they are established. 

• Submitting the application electronically via the portal of the country in which they are established. 

Regarding the burden of proof for these requirements, Article 105.1 of the General Tax Law 58/2003 of 17 December states that anyone asserting a right must prove the facts that constitute it. Therefore, it is the applicant’s responsibility to demonstrate to the Tax Administration that all the requirements have been met. 

In this case, the Tax Administration rejected the application for a VAT refund on the grounds that the reality of the transactions had not been proven. The Administration justified this decision on the basis that the invoices had not been paid. 

However, contrary to the Administration’s criteria, the Court considers that refusal based on a lack of proof of transactions cannot be justified by unpaid invoices alone. Instead, the Administration must make further efforts to reasonably conclude that the transactions were not carried out and that the invoices are therefore false. 

Consequently, the Court finds that the grounds on which the Tax Administration based its decision are incorrect and that the decision should be annulled, with the requested VAT refund being granted.