Successful non-trading entity VAT refund

The tax department of Malaga Law Solicitors, headed up by Mario Martinez Ramos, has been successful in arguing a VAT refund due to a non-trading entity in the amount of EUR493,570 + interest.

The background to the matter was a developer had commenced a project to reform a sports facility with restaurant, cafeteria, gym, SPA, and tennis courts.

During the development phase the developer paid out VAT in the amount of EUR493,570 but the business activity had not yet started.

VAT Question – Is the developer in these circumstances entitled to reclaim the input VAT?

The company’s own tax advisor, having already discussed the matter with a somewhat low-level tax official, advised that it was not possible to reclaim this VAT paid as the company was not trading and that it would only be possible to compensate this sum over the next 4 years if the company commenced trading. The developer not happy with the situation contacted Malaga Law Solicitors to study the law in this area.

Malaga Law Solicitors researched the relevant VAT laws (IVA – Impuesto sobre el Valor Añadido), advising that it should be possible to reclaim this sum, but of course it would be difficult to get the tax office to apply the law, as it would mean the tax office having to refund approximately EUR500,000.

Mario Martinez Ramos, discussed the matter informally with senior VAT officers at the Malaga tax office, reprocessed the VAT returns, revising the manner in which the invoices had been processed, presenting a listing of invoices, grouped by quarters, from the beginning of the works until application date and thereafter requested the VAT refund.

After 9 months of arguments with the tax office, the tax office finally agreed to refund all the input VAT despite the company not having commenced its business activity.

Notification / Notificación de resolucion expresa del procedimiento