The reform condemns the DDA, a tool that allows importers to avoid paying VAT. It penalizes, above all, small and medium-sized companies.

A recent modification of the VAT regulation, approved last November and which will come into force in January 2016, penalizes the importing SME in relation to the large company and almost liquidates the well-known deposits other than customs (DDA for professionals), a particular tax optimization tool that brings competitive advantages to companies here compared to those in other countries.

Experts call the modification self-inflicted damage because it was not even urged by Brussels
New tax scenario facilitates the operations of large importers

Despite the importance of the change, which had already been warned in the draft that the state government made public in June 2014, the response from the sector has been practically nil, a fact that international trade experts consulted attribute to the lack of unity in this economic fabric and a historical aversion to transparency, which hinders the flow of information and communication between the different agents. The truth is that weeks after the approval of the reform there are still many companies and also large institutions affected that are beginning to realize the new scenario. And these are changes that substantially alter the rules of the game.

To appreciate the importance of the modification, it is necessary to have a basic understanding of how this part of international trade works. When a company established in the European Union imports products from outside the countries that make up the European Union, it must pay the tariffs determined by Brussels for each type of article. In addition, the taxes of each country are applied, especially VAT on imports. It is conceivable that in a standard foreign purchase operation, a company receiving a container at the port has to pay the manufacturer of the goods, the stevedore, the warehouse owner, the customs officers, the transporters, etc. In order to avoid adding VAT to these payment commitments, storage spaces linked to the Tax Agency’s customs service were created so that this payment could be deferred upon leaving the premises. Initially, these warehouses were designed for companies that had to do some manipulation before selling, to make changes of ownership or to pay in installments as the merchandise left the warehouse. There are private bonded warehouses, associated with large importers, and public bonded warehouses, mainly declared for freight forwarders and serving any integrated company. There are more than 200 bonded warehouses in Catalonia, most of them in the provinces of Barcelona and Tarragona and close to the ports. Its control corresponds to the only two workers of the customs service that there are in Catalonia for this task. There are bonded warehouses, of course, all over Europe.

However, in 1992, the so-called warehouses other than customs w arehouses (DDA) were created, based on a modification of former warehouses for tobacco and alcohol, which are subject to excise duties. DDAs have the advantage that they do not have to charge VAT even when the goods leave the premises. In this way, the importer can place the product, sell it and pay the VAT at a later date. Surely this was not the legislator’s intention, but almost everyone has used DDAs as a tax tool to avoid having to pay VAT and avoid a burden on treasuries. And if at the beginning it was only large companies, now it is all of them. “The crisis and financial difficulties have generalized its use, especially among SMEs,” explains Manel Anguren of Guiex, an international trade consulting firm.

The changes

One of the modifications introduced in the law radically restricts its use to a very specific group of products, including sugar and olives. They are basically unprocessed and non-industrial products, and, although it is certainly not an arbitrary choice, no one can explain why these and not others. “It’s a giant restriction, whoever has a deposit and lives off this activity can look for another job,” Anguren says.

The second modification involves a new restriction that affects the profile of the companies that can suspend the payment of VAT, which as of January 1 will only be those registered in the Redeme (VAT Monthly Refund Register). It should be recalled that only companies with a turnover of more than six million euros are obliged to be part of this regime. It is true that SMEs can apply for registration with Redeme, but the requirements involved do not encourage them to take this step. As if this were not enough, enrollment is only possible in some periods and on January 31 the current period ends and the window will not reopen until November.

For Daniel Agosto, also a partner at Guiex, “the current law worsens the conditions of SMEs and the improvement of large companies, without any objective motivation”. In fact, the law avoids providing explanations. There is no evidence that the associations of large importers have lobbied in this sense, and they have probably found the change as a gift from the Three Wise Men. Nor has there been a request from Brussels in this regard.

If we are to speculate, surely the increase in the number of companies using DDAs poses a problem of control that is not easy when there are only two officials in Catalonia. But there is no evidence that this is the cause.

The truth is that the Spanish government’s coup de grace to the DDA will not be innocuous and will have consequences on the desire to be the logistics gateway to southern Europe, as denounced by Anguren and Agosto, who recall that the DDA is a tool for attracting international companies.

Rotterdam, Europe’s largest port, has a tax policy that favors imports, makes it easier for companies to avoid VAT and does not distinguish by size.

Francesc Muñoz, Barcelona