Input VAT in Spain: What is Deductible and Non-deductible?

The deductibility of input VAT follows specific rules and varies by type of expense. Here's an overview of what is generally deductible and non-deductible in Spain.

In Spain, businesses can reclaim the VAT they pay on purchases and expenses, known as input tax, provided these expenses are incurred for business purposes. The deductibility of input tax follows specific guidelines and varies by type of expense. Here's an overview of what is generally deductible and non-deductible in Spain.

Deductible Input Tax in Spain

Some expenses are fully deductible, while others are subject to special deduction rules:

  • Accommodation and Meals: The VAT on hotel stays and restaurant meals is 100% deductible if the expense is for business purposes and the invoice is issued to the company.
  • Events and Conferences: VAT on these activities is 100% deductible, recognizing their importance in business operations and networking.
  • Transportation: Taxi, train, and other transport expenses are 100% deductible with a valid invoice.
  • Vehicle Expenses: Car purchase or rental is 50% deductible by default. This includes trailers, mopeds, motorcycles, mixed vehicles, and all-terrain vehicles. If you can prove the vehicle is used exclusively for business, 100% of the VAT can be reclaimed.
  • Communication and Office Supplies: VAT on home telephones and mobile phones used for business is deductible.
  • Advertising and Marketing: These expenses are fully deductible.
  • Miscellaneous Business Expenses: Attendance at training courses, seminars, and conferences is fully deductible, while parking fees are 50% deductible.

Non-deductible Input Tax in Spain

  • Entertainment Expenses: Generally, expenses related to business entertainment are non-deductible, including leisure events and activities.
  • Business Gifts: Gifts are non-deductible unless they are promotional samples or low-value items (less than EUR 200 per year). 
  • Foodstuffs, Alcohol, and Tobacco: VAT on alcohol and tobacco is not recoverable as they are considered private expenditures.
  • Jewelry and Precious Stones: Jewelry and items made of gold or platinum are non-deductible.
  • Private Expenditures: Goods and services not directly and exclusively used for business are non-deductible.

Learn more about Spanish VAT in our Spanish VAT manual.  

What are the conditions for input VAT deduction?

If you have verified that your business expenses are deductible, now you need to check what are the formal conditions to be able to deduct this input VAT:

  • Be a taxable person for VAT purposes.
  • Carry out taxable operations that give the right to the deduction. If you are involved in the supply of exempt goods or services (e.g. health or educational services), you may be subject to special deduction rules.
  • The VAT paid must refer to expenses related to your business activity.
  • Have the invoice or document supporting your right to deduct. The document must comply with Spanish invoice requirements and be recorded in the register of invoices received.

If you meet the previous requirements, you can deduct the VAT in the corresponding VAT return. You have a period of four years following the tax point for the transaction.

Have a look at the applicable statute of limitations, and the tax point rules in Spain.

In summary, the key to reclaiming input tax in Spain lies in ensuring that expenses are business-related and properly documented. While items like hotel stays, restaurant meals, and transportation can often be fully reclaimed, personal and entertainment expenses generally cannot. By adhering to these guidelines, businesses can effectively manage their VAT deductions and optimize their tax efficiency. Have a look at the official guidelines for input VAT deductions in Spain. Also, art. 95 Spanish VAT Law.

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