Can the Tax Agency check VAT credits from years that are already time-barred?

The fact that four years have passed does not necessarily mean that the Tax Agency can no longer look back.

The Supreme Court has clarified an important issue for businesses and self-employed people who carry forward VAT credits: the Tax Agency may check the origin and amount of a VAT balance generated in a period for which the right to assess tax has become time-barred, if the credit is used in a later period that remains open to adjustment.

This is the ruling reported in Supreme Court Judgment 988/2026 of 23 July 2026 (appeal 5852/2023, ECLI:ES:TS:2026:3506; official CENDOJ case-law search, by ECLI).

Time-barred assessment does not mean that checks are impossible

The key is to distinguish two different powers of the Tax Agency.

As a general rule, Article 66 of the General Tax Act (Law 58/2003) gives the Tax Agency four years to determine a tax debt by assessment.

Since the reform introduced by Law 34/2015, however, the Act distinguishes between the right to assess and the right to check and investigate.

Article 66 bis(2) specifically provides that the Tax Agency's right to start checking tax losses or VAT credits that have been offset, remain available to offset, or have been used or remain available for deduction is subject to a ten-year period. This period runs from the day after the filing deadline for the return or self-assessment in which the right arose.

Article 115 also allows checks to cover facts and transactions from time-barred periods where examining them is necessary to adjust a tax liability for a period that is still open.

What exactly did the Supreme Court say?

The dispute was whether this regime also applied to VAT.

The company argued that VAT does not technically involve “quotas pending offset” in the same way as other taxes, but rather a balance resulting when deductible input VAT exceeds output VAT.

The Supreme Court rejected that interpretation.

It considered that a VAT balance carried forward is, in substance, a tax credit that the taxpayer intends to use in later periods.

It therefore falls within the Article 66 bis regime.

The Court's doctrine is that, following the 2015 reform, the Tax Agency may check VAT balances carried forward, or excess deductible input VAT over output VAT, generated in periods for which the right to assess has expired, when those balances are used in later periods that are not time-barred and checking their existence and amount is necessary to adjust those later periods.

A simple example

Suppose a business generates a VAT credit of €40,000.

It then uses that balance in its VAT returns over time.

The fact that the right to assess the period in which the €40,000 arose has become time-barred does not automatically make the tax credit immune from review.

If part of the balance is carried into a later period that can still be adjusted, the Tax Agency may check whether the credit existed and what its correct amount was.

For example, it may examine the transactions and records that gave rise to the input VAT included in the balance.

What it cannot do is use that check to issue a new assessment for the time-barred period.

The historic check can have effect only on a later period that remains open to adjustment.

This distinction is fundamental.

The ten-year period

The ruling's most striking aspect is its application of Article 66 bis(2) to VAT.

This provision sets a specific ten-year period for starting a check of these tax credits.

Accordingly, the four-year time limit for assessment should not automatically be treated as the period during which the Tax Agency may check tax items that continue to affect later periods.

There is an important qualification: the ten years are the specific statutory limit for the right to check under Article 66 bis, not a new general limitation period for VAT.

For VAT, Article 99(Five) of the VAT Act (Law 37/1992) also limits how long excess input VAT may be carried forward. Each case therefore requires a combined assessment of when the balance arose, when it was offset and which later period is under review.

It would be wrong to say simply that “the Tax Agency can assess ten years of VAT”.

It cannot.

What it may do is look at a time-barred period to verify a tax credit that is affecting another period which remains open to adjustment.

Keep the supporting records

The judgment also has an important practical consequence.

It is not prudent to automatically destroy the records supporting a VAT balance simply because four years have passed since the period in which it arose.

Article 70(3) of the General Tax Act expressly maintains the obligation to substantiate information arising from transactions in time-barred periods when it continues to affect later tax liabilities, including the cases covered by Article 66 bis.

Where VAT balances remain available to offset or have been used in later returns, businesses should keep the records needed to prove their origin, existence and amount.

Conclusion

Supreme Court Judgment 988/2026 of 23 July confirms a distinction that is increasingly important in tax proceedings:

The fact that a period is time-barred does not necessarily put everything that happened in it beyond the Tax Agency's reach.

The Tax Agency can no longer assess that expired period.

But if it generated a tax credit that the taxpayer later uses, the authorities may check whether the credit existed and how much it was worth when necessary to adjust a later, non-time-barred period, subject to Article 66 bis.

For certain tax credits, the right to start such a check has a statutory period of ten years.

The practical point is clear: the time limit for assessing a tax period and the time limit for checking a tax credit are not always the same.

When tax credits are carried forward, keeping the supporting records may prove decisive many years later.