Recently, the Central Economic-Administrative Court (TEAC) reaffirmed its position, aligning with the case law of the Court of Justice of the European Union (Case C-515/24), regarding the limitation of the right to deduct VAT incurred on these types of expenses.
According to the administrative doctrine, the right to deduct input VAT incurred on the purchase of goods and services intended for entertaining clients, employees, or third parties is excluded. This expressly includes tickets for sporting events and the use of hospitality boxes under sponsorship agreements.
In the case analyzed, the tax authorities denied the full VAT deduction on expenses related to sponsorship agreements — including tickets, merchandising items, and leased vehicles provided to employees — because the company failed to demonstrate that these expenses were used exclusively for business purposes or that the provision of the vehicles was made for consideration.
This restrictive interpretation entails a high risk of adverse tax adjustments in the event of an audit. It is therefore essential to analyze the true nature of each expense and keep suitable supporting documentation in order to avoid potential tax contingencies.
Having the support of an experienced team makes it possible to identify these limitations and apply the current criteria with legal certainty, ensuring regulatory compliance. For the proper management of these deductions, PLANA VENTURA GARCÉS offers the necessary technical advice to mitigate risks before the tax authorities.
