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Supreme Court Jurisprudence on VAT Balance Offsetting

Miguel González 27 November, 2023

Supreme Court jurisprudence is clear: VAT balance compensation is more than a tax option, it is an inalienable right. According to article 119.3 of the LGT, the Court establishes that two elements must exist to consider a tax option: an objective one, related to the creation of a choice between exclusive tax regimes by the tax norm, and a subjective one, linked to the taxpayer's will expressed in their declaration.

In this context, the Supreme Court concludes that the compensation of outstanding balances in VAT, according to article 99. Five LIVA, constitutes a right as long as it is done within four years from the filing of the return that originated said balance. This approach excludes the consideration of compensation as a tax option, as established by the TEAC in its resolution of October 24, 2023, RG 272/2021.

This Supreme Court ruling sheds light on the nature of VAT balance compensation, emphasizing that it is not simply a choice between tax options, but an intrinsic right of the taxpayer. The four-year window to exercise this right from the filing of the return provides a clear timeframe for taxpayers.

The relevance of this jurisprudence lies in clarifying the legal nature of VAT balance compensation. It is not a tax option but a right that can be exercised by taxpayers within the established period. This interpretation strengthens the position of taxpayers by providing a solid legal basis for VAT balance compensation.

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