Who can deduct the VAT incurred? Requirements and necessary documentation

 

The right to deduct the incurred VAT is one of the pillars of the Value Added Tax system. However, it is not enough to have paid VAT on a purchase to be able to recover it. The regulations require that certain requirements related to the economic activity and the correct documentation of the operations are met.

Who can deduct VAT?

In general, entrepreneurs and professionals who use the goods or services acquired for the development of their economic activity can deduct VAT.

These include:

• Entrepreneurs and professionals who have already started their activity.

• Those who have incurred VAT before starting the activity, provided that such acquisitions are intended for it.

• Those who occasionally carry out exempt deliveries of new means of transport.

• Taxable persons who simultaneously carry out operations subject to VAT and certain operations not subject to VAT, applying, where appropriate, the corresponding proportion.

When can VAT not be deducted?

There are situations in which the incurred VAT is not deductible.

For example:

• When the goods or services are not acquired with the intention of allocating them to a business or professional activity.

• When they are exclusively allocated to operations that do not generate the right to deduction according to VAT regulations.

In these cases, even if the goods are subsequently used partially in the activity, the deduction may be limited or even deemed inappropriate.

Formal requirements to deduct VAT

In addition to the purpose of the expense, it is essential to meet a series of documentary requirements.

Among the most important are:

• Have the original invoice or the corresponding supporting document.

• That the invoice meets all legal requirements.

• Correctly record the operation in the VAT input book.

• Include the deductible VAT in the corresponding self-assessment.

Depending on the type of operation, the required documentation may vary:

• Original invoice from the supplier for domestic purchases.

• Invoice from the supplier for intra-community acquisitions.

• Customs clearance document for imports.

• Invoice from the supplier for operations with reverse charge.

What happens if a requirement is missing?

Failure to comply with any of the formal requirements does not necessarily imply the definitive loss of the right to deduct VAT.

However, the Tax Agency may delay the deduction until the taxpayer rectifies the detected defects.

Furthermore, the regulations allow exercising the right to deduction in the declaration corresponding to the accrual period or in any of the declarations submitted within the following four years.

The deduction of input VAT requires much more than having an invoice. It is necessary for the expense to be linked to the economic activity, for the documentation to be correct, and for all registration and declaration obligations to be adequately fulfilled. Proper document management is essential to avoid incidents with the Tax Agency and ensure the exercise of the right to deduction.