Through a recent resolution issued on 22 April 2015, the Central Economic-Administrative Court (TEAC) has analyzed the direct effect of EU VAT Directive regulations that have been unduly implemented in the Spanish VAT Legislation. In this particular case, the incorrect domestic implementation benefited the taxpayer and the Central Tax Court has ruled that when a provision has not been duly transposed into national legislation, the direct application of Community law against taxpayers and in favor of the Tax Administration is forbidden.

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Through a recent resolution issued on 22 April 2015, the TEAC no longer requires taxpayers to pay VAT that has been charged on an invoice but unduly accrued based on Community law. When a provision has not been duly transposed into national legislation, the direct application of Community law against taxpayers and in favor of the Tax Administration is forbidden.

In the case at hand, the taxpayer charged VAT on an invoice at the express request of the recipient (a Public Administration). However, the taxpayer did not account for such VAT through its periodical VAT returns and filed an explanation to inform the Tax Administration that it considered the transaction to not be subject to VAT and, hence, no VAT would accrue.

This led to a tax audit and the respective assessment through which the Tax Administration confirmed that: (i) the transaction was not subject to VAT and, thus, tax was not duly accrued; (ii) in spite of this, the taxpayer would have to pay the VAT charged on the invoice based on Article 203 of VAT Council Directive 2006/112/EC, pursuant to which VAT shall be paid in any case if charged on an invoice; and finally, (iii) that output VAT could only be corrected through the issuance of a corrective invoice and not through the document filed.

The TEAC ruled that, though the taxpayer did not correct the output VAT actually accrued through the issuance of a corrective invoice and following the legal procedure, based on Community law the Tax Administration cannot require the payment of VAT that has been charged on an invoice but not duly accrued. The EU VAT provision of reference has not been duly transposed into Spain's national legislation, which only requires the payment of the VAT accrued, without including any mention of the VAT charged on an invoice. Furthermore, according to European Court of Justice case law, when a provision has not been duly transposed into national legislation, the direct application of Community law against taxpayers and in favor of the Tax Administration is forbidden.