Sports entities may deduct VAT on expenses for tournaments

The deductibility of Value Added Tax (VAT) in the sports sector has been clarified by the Tax Administration. The focus of the matter lies in determining whether the expenses necessary for organizing sports tournaments or competitions can be subject to deduction when the sports entity carries out various activities.

What the DGT has ruled

The Dirección General de Tributos (DGT) has established that the sale of tickets for attending sports tournaments or competitions is considered an activity subject to, and not exempt from, VAT. As it is a taxed activity, the goods and services acquired for the purpose of organizing such events allow for the deduction of the VAT paid.

However, the ruling emphasizes that the capacity for deduction depends on the nature of the entity's activity. If the sports organization simultaneously carries out activities exempt from VAT, it will not be able to deduct all of its expenses and must apply the control mechanisms provided for in the regulations.

What this means for you

For sports entities, this criterion represents a confirmation of their right to recover the VAT on operating costs linked to the organization of events that generate income through ticket sales. This includes supplies, services, and goods specifically intended for the execution of such tournaments.

However, complexity arises when the entity has a mixed business model. If the entity combines ticket sales (taxable) with other exempt activities, the deduction will not be automatic on the total purchases. In these cases, the entity must apply:

• The pro-rata rule to determine the applicable deduction percentage.
• The split-sector regime, if it meets the legal requirements to account for its activities separately.

What should be done

It is necessary to conduct an analysis of the sports entity's income structure to determine what percentage of the VAT paid is effectively deductible. The correct classification of activities between taxable and exempt is fundamental to avoid errors in tax settlements and possible inspections under Law 37/1992 on VAT and Law 58/2003 General Tax Law. It is recommended to consider implementing a split-sector regime if the entity has a structure that allows for a clear separation of taxable and exempt activities.