Proposal so small businesses and the self-employed pay VAT only when paid

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1. The bill addresses a problem: companies pay VAT when they issue an invoice, even if the client has not paid them yet. According to the text, the self-employed were advancing almost 2,000 million euros in VAT on unpaid invoices.
2. The bill would change this by applying the so-called cash criterion: VAT would be declared when payment is received, not when the invoice is issued. It relies on a 2010 European directive that allows this.
3. The bill would add a new section to Article 75 of the VAT Law. Under it, small and medium-sized businesses and the self-employed would pay the tax only on amounts they have actually collected.
4. The Government would have three months from the law's entry into force to approve the necessary implementing regulations. The law would enter into force the day after its publication in the Boletín Oficial del Estado (official state gazette).

Who it affects

• Small and medium-sized businesses: They could declare VAT only when they collect invoices, not when they issue them.
• Self-employed workers: The same cash-collection criterion would apply to them for VAT.
• The Government: It would have three months to approve the necessary regulatory changes.

Words worth knowing

Criterio de caja (cash criterion)

A way of calculating the tax under which you pay when you receive the money, not when you issue the invoice.

Devengo (accrual)

The moment the obligation to pay the tax arises.

Sujeto pasivo (taxable person)

The person or business required to pay the tax.

Directiva europea (European directive)

A European Union rule that requires member countries to adapt their laws to what it says.

It summarizes the text as it was introduced. It is written by artificial intelligence and may contain mistakes: the official text is what counts. Read the official text · How we make summaries