Travel and accommodation expenses may be deductible for CIT and VAT if requirements are met

The deductibility of expenses derived from business activity, such as travel, accommodation, or utility consumption, is a point of constant attention for the tax administration. A recent binding ruling from the Dirección General de Tributos (DGT) clarifies the criteria that must coexist for these disbursements to be accepted for both Corporate Income Tax (IS) and Value Added Tax (IVA).

What the DGT has resolved

The DGT determines that, for travel, accommodation, and utility expenses to be deductible for Corporate Income Tax (IS), they must comply with the requirements of current regulations:

• Accounting entry and application of the accrual principle.
• Direct correlation with the generation of income.
• Documentary justification through invoices that meet regulatory requirements.
• Not being classified as non-deductible expenses according to Article 15 of Law 27/2014 on Corporate Income Tax.

Regarding VAT (IVA), the resolution indicates that accommodation and catering services are deductible as long as they do not meet the particular needs of personnel, are carried out strictly for business activity needs, and are considered deductible expenses for Corporate Income Tax (IS). Likewise, it is essential that the invoices are issued in the name of the inquiring company.

What this means for you

For companies, this resolution confirms that deductibility is not automatic, but rather depends on correct documentary management and the nature of the expense. It is not enough to make the disbursement; it is necessary to demonstrate that the expense has an exclusively business purpose and does not constitute a personal benefit for employees or managers. The lack of an invoice correctly issued in the name of the company or the absence of a clear link to the economic activity would prevent the application of these deductions.

What should be done

It is necessary to ensure that all travel, accommodation, and utility expenses have a formal invoice that complies with the requirements of the VAT Law. It must be verified that the accounting faithfully reflects the accrual of these concepts and that there is a clear traceability linking the expense to the generation of income. Each situation must be analyzed to guarantee that the expense is not considered a personal amenity or a non-deductible expense under Corporate Income Tax regulations.