The deductibility of subsistence allowances and travel expenses in Spain entails important savings for companies or self-employed workers. However, this requires compliance of a series of conditions and document requirements that need to be taken into account, which we describe in this article. We shall explain all the aspects pertaining to subsistence allowances and transportation costs, food and board, according to the two most relevant taxes for companies in Spain, Corporate Tax and Value-Added Tax.
In accordance with Spanish law, subsistence allowances and travel expenses in Spain are deductible provided that they are regularly assessed with regard to the type of tax.
This entails important savings for companies or self-employed workers. However, this requires compliance of a series of conditions and document requirements that need to be taken into account.
This article shall particularly focus on the deduction of travel expenses in Spain, with regard to the specific cases of Corporate Tax and Value-Added Tax.
Corporate Tax – travel expenses in Spain
The expense shall be tax deductible if it complies with the legally established requirements of accrual, justification and correlation with income and expenses, that is, it shall be deductible in the year in which it arises, it must be documented with an invoice, and it must have a direct relation with the income of the company.
In accordance with Article 14 of the Corporate Tax Law, expenses that are not directly related to income, those called by the law “liberalities”, shall not be deductible. Nevertheless, the same article points out that public relations expenses with customers and suppliers, disbursements given to company staff by law or by custom, expenses to promote the products and services of the company or that are related to the income obtained, are indeed deductible.
Value-Added Tax – travel expenses in Spain
As occurs with Corporate Tax, the VAT is deductible provided that the expenses are directly related to the income obtained. The expenses must be linked to the economic activity of the company, and must be documented (complete invoice), which must be accounted for reflecting the expense and corresponding VAT.
It is only possible to deduct Spanish VAT in Spanish settlements, for which there is a period of only 4 years, and only the proportion of VAT of the expense that affects the activity of the company is deductible.
It is important to take into account that the VAT under the concept of upkeep expenses is not deductible.
Under no circumstances are they deductible, in any proportion, the amounts borne as a consequence of the acquisition of the following goods and services:
- Jewellery, gems, precious stones…
- Food, beverages and tobacco.
- Shows and services of a recreational nature.
- Goods or services used as gifts to customers, employees or third persons.
- Free samples and inexpensive promotional objects shall not be considered as such.
- The journey or travel, hotels and restaurants, unless the amount of the same is considered a tax deductible expense for the purposes of Personal Income Tax or Corporate Tax.
With regard to the specific case of transport expenses: the VAT of the transport may be deductible if it is directly related to the income and is directly linked to the activity of the company and has been recorded in the accounting records.
To be deductible, subsistence allowances and travel expenses in Spain must be geared to public relations with customers or suppliers, must be used as a means to promote activity, and there must be correlation with income.
Peter Spiller
