Contracts of Sale, Consumer Rights, and VAT in the EU

Posted on Aug 6, 2024 in Law & Jurisprudence

Contracts of Sale

Other Contracts of Sale

Supply: A power company agrees to provide permanently or periodically to a client any product or service, paying a price for this amount or timing of the good or service.

Buying and selling in installments: The seller delivers to the buyer a thing, and the buyer undertakes to pay for it in installments over a period exceeding 3 months. The property is not complete for the buyer until they have paid in full.

Leasing: This is leasing with a purchase option whose value is the residual value when the contract ends. Two types exist:

  • Finance: The tenant pays the residual value at the end of the contract and buys the property.
  • Force: The lessee may return the property before the end of the contract.

Renting: This is a dry lease with a purchase option, where the landlord runs the property with all maintenance expenses, and the tenant cannot give up the contract before the term set.

Franchise: An enterprise supplies goods, gives a mark, and provides services to another for a consideration and acceptance of economic conditions.

E-commerce: Electronic commerce.

Consumer Rights

It defines users or consumers as natural persons or legal entities used as final beneficiaries of goods, products, or services, whether public or private, individual or collective, who produce, facilitate, provide, or issue them. It recognizes the following rights:

  • Protection against risks.
  • Protecting legitimate economic and social interests.
  • Indemnification or repair of property damage.
  • Hearing on consultation, participation in the development of procedural rules, and representation of their interests.
  • Legal, administrative, and technical protection.

Consumer Arbitration System

What is it?

It is a voluntary court procedure for resolving a dispute between a company and a consumer.

What are its main characteristics?

  • Speed: It is processed very quickly.
  • Effectiveness: The result is identical to court judgments.
  • Voluntariness: Both parties agree to the resolutions.
  • Enforceability: The awards are binding on both parties.
  • Economy: It is free for both parties.

Who participates?

Consumers and employers.

Do you apply?

It applies to claims from consumers and users regarding their legally recognized rights.

How does it develop?

  • It starts with a formal demand for arbitration.
  • Once the application is accepted, the parties are summoned to a hearing, which may be held at a convenient location.
  • The procedure concludes with an award that resolves the conflict.

If the parties reach an agreement, this will be reflected in an award. Against the award, only an annulment appeal can be made to the Provincial Review.

Taxation of the Sale

The EU tax system applied to purchases is an indirect tax levied on the increase in the value of products: value-added tax (VAT).

Fiscal Terms

  • Tax: A tribute demanded by the state from citizens without any consideration.
  • Excise tax: Levied on consumption.
  • Taxable event: The cause of the tax.
  • Exemptions: Situations that do not respond to the tax base.
  • Scope of Application: The territory over which the tax is applied.
  • Taxable person: A natural or legal person who is subject to the tax.
  • Taxable income: The monetary value on which the tax applies.
  • Tax rate: The percentage that represents the tax base.
  • Tax fee: The value obtained by applying the tax rate to the tax base.

Features of VAT

Legal Framework

The tax is regulated in Law 37/1992 and Royal Decree 1624/1992.

Concept

A tribute of an indirect nature that falls on consumption and is levied on:

  • Supplies of goods and services by employers or professionals.
  • Community acquisitions of goods.
  • Imports of goods.

Scope of Application

The scope is the EU, but some member states’ territories and some outlying areas are excluded.

Taxable Transactions

The delivery of goods and the rendering of services provided by professionals and supplies of goods within the EU.

Exemptions

  • Medical and health services.
  • Cultural, social, and sports services.
  • Education services.
  • Insurance and financial operations.
  • Sale of land that is not buildable.
  • Second and subsequent transmissions of buildings.
  • Public services.
  • State lotteries and betting, Autonomy, and ONCE.

Taxable Person

Ultimately, the tax falls on the consumer, but the obligation is on the employer.

Taxable Income

It is constituted by the total value of the benefit vested in the tax.

Tax Rate

The general rate is 16%, but there are two reduced rates: 7% and 4%.

  • 16%: The most general type of taxable goods and services.
  • 7%: Taxable goods considered basic rations.
  • 4%: Taxable goods considered necessities.

The tax fee is estimated by applying the tax base to the relevant tax rate.

Operation of VAT

  1. When a company buys an asset, it must require that the invoice includes VAT and record the transaction in the VAT input book.
  2. When a company sells an asset, it must submit invoices containing VAT and record the transaction in the VAT output book.
  3. Quarterly, the company must perform the VAT clearance to the tax office, subtracting input VAT from output VAT.
  4. Annually, an annual summary is presented on an official form.
  5. The employer has a number of obligations:
  • Issue, receive, and archive invoices with all the necessary information.
  • Keep the invoice book up to date.
  • Make settlements on time.
  • Communicate to the tax authorities the identification of customers who have carried out transactions exceeding a particular sum of money.