Spain: Issues to be considered by financial, insurance industries when calculating VAT pro-rata for 2023
Issues to be considered by financial and insurance industries when calculating VAT pro-rata for 2023
Issues to be considered by financial and insurance industries
Law 13/2023 (24 May 2023) introduced a number of relevant amendments for the financial and insurance industries. Read TaxNewsFlash
One such amendment was the elimination of application of the value added tax (VAT) use and enjoyment rule. This modification is likely to have a significant impact on the VAT deductibility regime applicable to entities that provide financial and insurance services to entrepreneurs or professionals not established in the European Union (EU). In many cases, this could entail a relevant VAT saving, to the extent that these operations could be included in the numerator of the VAT pro-rata calculation, thus increasing the amount of input VAT recoverable by such entities.
The impact will be especially notable in the case of financial entities that have contracted derivatives, whether for hedging or speculation purposes, with counterparties not established in the EU. It will also be particularly important, in the wake of this legislative amendment, to review the amount to be included in the pro-rata calculation in respect of financial and insurance operations, taking into account the rules for determining the tax base of such operations and the effective date of this legislative amendment, as well as the applicable accrual rules.
In this regard, the VAT return corresponding to the last period of 2023 (to be filed by 30 January 2024) will be the first return in which the effects of this modification on the calculation of the VAT pro-rata will need to be considered.
Read a January 2024 report [PDF 493 KB] prepared by the KPMG member firm in Spain
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.