Claiming debts in Spain: Unpaid invoices

When is it possible to claim an unpaid invoice according to the Spanish legislation?

An invoice is considered to be unpaid from the moment when the deadline granted in the invoice to the debtor for payment has expired without payment having been made. If no deadline has been agreed, the invoice must be paid by the debtor within thirty calendar days after the date of receipt of the goods or provision of the services. Once this period has elapsed, the invoice is considered unpaid, and a judicial complaint aimed to claim the unpaid amount can be filed.

How do I claim for an unpaid invoice?

When payment of an invoice is not made by the debtor within the prescribed period, the creditor may take action to claim the payment of the outstanding amount. In practice, it is necessary to check that the debtor received the invoice correctly, demand explanations for the non-payment and ensure that such claims are in writing. Once the debtor’s intention to ignore his payment obligation has been confirmed, the creditor may attempt an out-of-court claim by sending a formal notice by reliable means, generally by means of a burofax.

If the amicable procedure is unsuccessful, the creditor must initiate the actions provided for in Spanish law, with special mention of the payment order procedure (“procedimiento monitorio”).

Our experience confirms the great effectiveness of legal action for debt recovery, provided that a prior examination of the feasibility of the action and the solvency of the debtor is carried out.

How are invoices claimed judicially?

The Spanish legal system includes a special process for debt recovery: the payment order process (“procedimiento monitorio”). This special procedure can be used to claim a debt that is determined, due and payable. Although the most common basis for the initiation of an order for payment procedure is an invoice, the Spanish legislation does not establish any formal requirements for a document to be a source of a debt, provided that such debt is determined, due and payable. Therefore, the range of documents that can be used as a basis for the initiation of an order for payment procedure is wide.

The initial application for an order for payment does not require the participation of a lawyer and a solicitor. However, given that the commencement of the order for payment procedure can lead to a more complex judicial process, it is advisable that, from the beginning of the amicable claim, the process is led by a lawyer. On the other hand, if the debtor does not pay the debt within the framework of the order for payment proceedings and an ordinary judicial proceeding has to be  initiated to continue with the claim for payment, in cases where the debt exceeds 2,000 Euros, the participation of a lawyer and solicitor is compulsory according to the procedural law.

It is required that the initial petition for payment order includes the essential data demanded by the Spanish legislation, namely, the detailed identity of the parties and the description and documentary support of the existence of the debt to be claimed. The order for payment procedure will be processed in the courts corresponding to the debtor’s domicile.

If the initial application for payment order complies with the formal requirements described above, the court will require the debtor to proceed with the payment or to object to the claim within a 20 days term.

If the debtor does not reply or does not oppose the creditor’s claim, the court will terminate the procedure by means of a decree and the creditor can then request enforcement in order to proceed with the seizure of the debtor’s assets if the debtor persists in his attitude of non-payment.

When the debtor considers that all or part of the debt is not due, he may oppose to the claim for the debt, in which case the creditor will be notified accordingly, so that he can proceed to initiate an ordinary declaratory proceeding. If the amount claimed is equal or less than 6,000 Euros, the debt claimed will be discussed in the framework of the verbal trial, in which case the creditor will have a period of 10 days to contest the opposition to his claim. If the debt is higher than the limit of 6,000 Euros, the creditor will have a one month term to file the corresponding claim before the Court, in which case an ordinary trial shall take place.

In both cases the proceedings will be terminated by means of a judgement issued by the Court of First Instance. Except for the cases in which the amount of the debt claimed is equal to or less than 3,000 Euros, the first instance judgement can be challenged, in which case an appeal can be filed before the Court of Appeal.

Once the judgement has been passed, if the claim is upheld in whole or in part and the debtor still refuses to pay the claimed amount, enforcement proceedings will be initiated, in the framework of which the debtor’s assets may be seized until the outstanding debt is covered.

The claimant must pay the court fee if he is a legal entity, i.e. a company, unless the amount of the debt claimed does not exceed 2,000 Euros. individuals are exempt from paying the court fee for the initiation of the procedure.

Which is the term for filing a legal claim for an unpaid invoice?

In 2015, a legislative amendment was enacted, establishing that the limitation period for claiming unpaid debts was reduced from 15 years to 5 years. If the payment obligation is prior to 7 October 2015, the previous 15 year term limit will be maintained, so that debts arising before this date may be claimed within 15 years of their accrual. On the other hand, debts generated after this date must be claimed within a maximum period of 5 years.

The limitation periods are interrupted by the filing of the legal action, as well as by the extrajudicial claim, i.e. when it is demonstrated that there is no passivity or inaction on the part of the creditor with respect to the amount pending collection. In order for the extrajudicial claim to be effective for the interruption of the limitation term, it must be made in a reliable manner, for example, by sending a burofax or registered letter with acknowledgement of receipt.

Is it possible to recover VAT on unpaid invoices?

It is possible to recover output VAT on invoices when it is ceratin that they cannot be collected, for example, because the debtor’s present and future insolvency is known with certainty. In order to recover the VAT before the Tax Agency, the debtor must be a company or self-employed person, the invoice must be registered in the accounts and the corresponding VAT must have been settled. In addition, payment must have been claimed from the debtor and, finally, a corrective invoice must have been issued so that the unpaid invoice is cancelled.

Law 42/2015, from october, 5, amending the Spanish Procedural code: https://www.boe.es/diario_boe/txt.php?id=BOE-A-2015-10727

Claim for VAT before the Tax Administration: https://sede.agenciatributaria.gob.es/Sede/iva/necesito-rectificar-iva-repercutido_iva-soportado/puedo-recuperar-iva-impagado-clientes/que-procedimiento-debe-seguirse-modificar-imponible.html#:~:text=las%20cuotas%20deducidas.-,Comunicar%20por%20v%C3%ADa%20electr%C3%B3nica%20a%20la%20AEAT%20a%20trav%C3%A9s%20del,de%20presentaci%C3%B3n%20de%20la%20declaraci%C3%B3n%2D