It is common business practice to contract travel agency services including travel and accommodation for the company’s employees that, due to business reasons, have to move outside their permanent homes and places of work.
In such cases, the deduction of input VAT is conditional to the expense qualifying as tax deductible for Corporate income tax purposes. Besides, as travel agencies are no longer obliged to break down VAT, your company should ask for an invoice in which such VAT is effectively broken down, if you want to deduct it.
✔ In Spanish Corporate income tax, the deduction of expenses is subject to compliance of the principle of correspondence of income and expenses, that is to say, expenses must be incurred for the purposes of the business activity and must be necessary to obtain income.
Besides, it is necessary that they comply with the requirements of accounting registration, allocation to the fiscal year in which they accrue and appropriate documentary evidence.
These criteria also apply to individuals acting as self-contractors, given that the Personal income tax rules applying in this field refer to the Corporate income tax requirements.
✔ In practice, the deduction of these expenses is only accepted by the Spanish tax authorities if your company has a complete invoice, despite the fact that the Courts (Superior Court of Justice of Cataluña, in a resolution of Nov. 30, 2007) have admitted that taxpayers cannot be asked to obtain a full invoice with regards to certain expenses, as this would be an unsustainable requirement. A decision as to whether these expenses have to be accepted as tax deductible or not should take into account general considerations based on customized practices.
✔ Input Vat is tax deductible in so far as these expenses qualify as tax deductible in Corporate or Personal income tax. However, the Spanish Central Court has recently clarified, in its resolution of January 26, 2017, that it is not necessary that the expenses are previously regularized in the course of a tax audit, in order to disallow the deduction of input VAT.
In relation to the formalities, travel agencies are no longer obliged to separately break down the VAT in their invoices, as it is deemed included in the transaction price. If your company is entitled to the VAT deduction because it meets the before mentioned requirements, then do not forget to ask for a full invoice, in which VAT is appropriately disclosed, should you wish to deduct it.