Spain’s Supreme Court issued a decision on 29 September 2025 in which it confirmed the applicability of the “full regularisation” principle in VAT matters. The court held that, after denying the deductibility of input VAT, the tax administration must make a full evaluation of whether the legal requirements are met for a taxpayer to qualify for a refund of undue payments related to the adjustment.
The legal debate in the case involved Article 14.2.c) of Royal Decree 520/2005, which approves the General Regulation for the implementation of the General Tax Law regarding administrative review and the interpretation of the full regularisation principle. The full regularisation principle requires the tax authorities to thoroughly assess a taxpayer's situation during an audit, taking into account both favorable and unfavorable outcomes. The taxpayer in the case took the position that this principle obliges the tax administration to fully correct the taxpayer’s tax situation and avoid the need to initiate a second procedure to obtain a refund of undue payments, since this would result in double taxation and violate the principles of neutrality and good administration.
The Supreme Court reiterated that the regularisation of a self-assessment must include both favorable and unfavorable elements for the taxpayer to prevent unjust results or double taxation situations. This principle applies to limited and full audit procedures.
The court emphasised that when the tax authorities adjust VAT amounts unduly charged, they must conduct an evaluation to determine whether the taxpayer is entitled to a refund, without requiring the taxpayer to initiate a new procedure to correct a self-assessment and/or to obtain a refund of undue payments.
The Supreme Court’s decision is supported by jurisprudence, which provides that the administration must take steps to avoid requiring a taxpayer to pay twice for the same tax liability, and take into account both unfavorable and favorable aspects of the procedure, without requiring any additional obligations and/or actions. As noted above, this principle also applies to limited audit procedures, and the taxpayer should not be required to initiate a new procedure to obtain the refund, as this would contravene the principles of efficiency, economy and proportionality. In the case, both parties agreed that the tax authorities must carry out the necessary actions to determine whether the legal requirements are met to recognise the taxpayer’s right to a refund of VAT amounts unduly charged during the relevant verification period.
The Supreme Court stated that when the tax authorities adjust VAT amounts unduly charged, they must also determine whether the taxpayer is entitled to a refund, thereby consolidating the application of the full regularisation principle in limited audit procedures.
Alvaro Gomez-Elvira
Maria Gonzalez
BDO in Spain
The legal debate in the case involved Article 14.2.c) of Royal Decree 520/2005, which approves the General Regulation for the implementation of the General Tax Law regarding administrative review and the interpretation of the full regularisation principle. The full regularisation principle requires the tax authorities to thoroughly assess a taxpayer's situation during an audit, taking into account both favorable and unfavorable outcomes. The taxpayer in the case took the position that this principle obliges the tax administration to fully correct the taxpayer’s tax situation and avoid the need to initiate a second procedure to obtain a refund of undue payments, since this would result in double taxation and violate the principles of neutrality and good administration.
The Supreme Court reiterated that the regularisation of a self-assessment must include both favorable and unfavorable elements for the taxpayer to prevent unjust results or double taxation situations. This principle applies to limited and full audit procedures.
The court emphasised that when the tax authorities adjust VAT amounts unduly charged, they must conduct an evaluation to determine whether the taxpayer is entitled to a refund, without requiring the taxpayer to initiate a new procedure to correct a self-assessment and/or to obtain a refund of undue payments.
The Supreme Court’s decision is supported by jurisprudence, which provides that the administration must take steps to avoid requiring a taxpayer to pay twice for the same tax liability, and take into account both unfavorable and favorable aspects of the procedure, without requiring any additional obligations and/or actions. As noted above, this principle also applies to limited audit procedures, and the taxpayer should not be required to initiate a new procedure to obtain the refund, as this would contravene the principles of efficiency, economy and proportionality. In the case, both parties agreed that the tax authorities must carry out the necessary actions to determine whether the legal requirements are met to recognise the taxpayer’s right to a refund of VAT amounts unduly charged during the relevant verification period.
The Supreme Court stated that when the tax authorities adjust VAT amounts unduly charged, they must also determine whether the taxpayer is entitled to a refund, thereby consolidating the application of the full regularisation principle in limited audit procedures.
Alvaro Gomez-Elvira
Maria Gonzalez
BDO in Spain