A Spanish company, leader in the sale of specialized machinery, delivers measuring machines for the automotive industry to various countries, among others Spain. The recipients of these machines are taxable persons for VAT purposes, duly registered in their respective countries of residence.
In the course of its business activities, the company incurs every month in the following expenses:
- €900,000 plus VAT for the purchase of raw materials necessary for its production, being all the purchases made within the Spanish market.
- €30,000 plus VAT for the rental of its factory.
- €7,500 plus VAT for other business expenses.
The goods and services acquired are subject to Spanish VAT at the standard rate of 21% (said acquisitions have taken place in the first semester of 2018). Consequently, the input VAT for the Spanish company every month amounts to €196,875 (i.e. 937,500 x 21%).
In addition, the Spanish company sells and distributes its products in the Spanish, European and other international markets every month of the first half of 2018 as follows:
- Spanish sales: €1,000,000 plus VAT.
- European Union Sales: €200,000.
- International Sales: €100,000.
The Spanish company must charge VAT for the supplies performed within the Spanish market at the standard rate of 21% (i.e. 1,000,000 x 21% = 210,000). However, the supply of goods to an European Union Member State, or the supply of goods to other third territories (export of goods), would be exempt from VAT provided that all the regulatory requirements are met; among others, the demonstration of the transportation of products outside the Spanish VAT territory and that the recipient of the goods is a VAT trader when the goods are supplied to other European Union Member State.
As the Spanish company’s turnover for the previous year exceeded the amount of €6,010,121.04, the company is considered to be a large company and therefore it is obliged to submit the returns on a monthly basis. Otherwise, the returns must be submitted quarterly.
The output VAT must be recorded in such return (i.e. €210,000). However, this amount may be offset with the input VAT borne in the prior acquisitions of goods and services derived from its business activity (i.e. €196,875).
The difference between the output VAT and input VAT will amount to €13,125, which will be the final tax to be paid to the Tax Authorities when submitting the return.