Since Wednesday January 1st, companies and self-employed can use the Cash VAT System, the main new tax feature of 2014. Pending approval until the Government approves the new tax reform, which will take effect in stages between 2014 and 2017.
Now SME and self-employed can delay the payment of the tax until the invoice is collected. This measure is included by the Goverment in the new Law of Entrepreneus, and is expected to benefit 1.3 million self-employed and 1 million SMEs.
This way, traditional accrual basis normally linked to invoicing is sustituted by a cash basis. This voluntary tool will allow to provide cash to those SMEs and self-employed with annual turnover under 2 million euros -the ones that can join these regime- but it will also imply new information obligations to fight tax fraud, such as adding collect and payment dates of invoices and form of payment.
Although the new system came into force on January 1st, companies can join it until march 31st 2014, instead of last December 31st as initially planned. This way they will have more time to adapt computer applications to the new system. Once adopted, they will be binded for a period of three years.
Besides, companies hiring SMEs and self-employed submitted to Cash VAT basis will not be able to apply deduction of this tax until payment is made, which according to the Government is an incentive for customers to advance invoice payments, as the sooner they pay the sooner they can deduce input VAT.