Spanish VAT Deduction limits
The right to deduct input VAT generally follows the rules on deduction of Corporate Tax. Expenses need to be incurred for business purposes. In practice, the below items are generally deducted at the following rates:
- Input VAT on hotel accommodation or restaurant meals is 100% deductible provided the invoice is issued to the company and the expense is incurred for business purposes.
- Input VAT on conferences, fairs and exhibitions is normally 100% deductible.
- Business gifts are 0% deductible unless for promotion samples or low value gifts (less than 200€ per year)
- Car rental, car repair and fuel expenses are 50% deductible where the expenses is connected to both, business and personal purposes. If wholly and entirely for business purposes, then VAT can be deducted at 100%.
- Taxi, train and other transport expenses are 100% deductible provided an invoice or simplified invoice is issued.
- Entertainment expenses are generally 0% deductible.
Deducting VAT before starting your actvities is only allowed under certain conditions. The expenses incurred should be connected to the expected business, there should be a short period between the expense and the start of the business and all accounting and tax obligations must be met.