Is Tax Free without charging VAT at checkout legal? What Spain’s Supreme Court and TEAC say

The VAT refund to travellers: a procedural formality, not a substantive requirement

The Real Tax Free model, under which the retailer does not charge VAT to the traveller at the point of sale, is supported by established case law and administrative doctrine. In October 2025, Spain’s Supreme Court held that the actual refund of the tax is a procedural formality rather than a substantive requirement of the exemption.

In May 2026, the TEAC applied this criterion in a resolution expressly classed as doctrine and therefore binding on the tax authorities.

The Real Tax Free model

Under the traditional Tax Free model, the traveller pays VAT in store and subsequently claims a refund. Under Real Tax Free, the retailer does not charge VAT at the point of sale.

This raises a legitimate question: where the refund does not strictly follow the regulatory procedure, does the exemption still apply? Two recent decisions provide the answer.

The Supreme Court ruling of 31 October 2025

The Spanish VAT Law (art. 21.2.A) and its implementing Regulation (art. 9.1.2.B) require the tax to be actually refunded to the traveller. The Supreme Court held that this is not a substantive requirement of the exemption.

Rather, it constitutes a procedural formality under domestic legislation. The exemption is determined by the substantive requirements, not by the specific manner in which the refund is made.

TEAC Resolution of 21 May 2026

The Central Economic-Administrative Court (TEAC) applied the Supreme Court’s criterion in Resolution RG 6651/2024. The case concerned a company that had replaced the standard refund procedure with a balance-offsetting system.

The TEAC upheld the company’s claim, finding that denying the exemption would be incompatible with the principles of fiscal neutrality and proportionality.

The binding nature of the resolution

The resolution is expressly classed as doctrine. Pursuant to article 239.8 of the Spanish General Tax Law, it is therefore binding on:

• All bodies responsible for applying the tax system, including the Tax Inspectorate.
• The Regional and Local Economic-Administrative Courts.

Implications for retailers

Under Real Tax Free, the refund does not take place strictly in accordance with the regulatory procedure. TEAC doctrine significantly strengthens the retailer’s defensive position against any reassessment by the Tax Inspectorate concerning the VAT exemption on supplies to travellers.

Compliance with the substantive requirements remains essential. These are examined in detail in the article on the substantive and formal requirements of the exemption.

Legal advice

STAMP provides retailers with direct access to its tax advisor at Cuatrecasas, Marta Álvarez Senra, partner and head of the tax department. Contact a STAMP specialist →

Source: Cuatrecasas note to STAMP on TEAC Resolution RG 6651/2024 of 21 May 2026. This article is for information purposes only and does not constitute legal advice on specific cases.

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