Comments on ECJ C-515/24: ECJ Upholds Spanish VAT Deduction Ban for Entertainment Expenses at Accession

CJEU upholds Spain’s denial of input VAT deduction on entertainment expenses

The Court of Justice of the European Union, in Case C-515/24, clarified that Spain’s simultaneous introduction of VAT and certain deduction restrictions is considered “maintained” under Article 176 of the VAT Directive, the “standstill clause,” due to Spain not having a comparable VAT system pre-accession.
The ruling adopts a functional, not formalistic, interpretation of the standstill clause, ensuring fair treatment for member states that joined without pre-existing harmonized VAT systems, and confirms the EU law validity of Spain’s deduction restrictions.
This judgment resolves a significant structural debate for Spain’s VAT law, reducing future litigation concerning the compatibility of its deduction limitations with EU law, and provides a broader reference for understanding the scope of standstill clauses in other EU member states.

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The Court of Justice held that Spain’s exclusion of input VAT deduction for representation expenses is compatible with EU law, as it took effect on the date of Spain’s EU accession (1 January 1986).
Before accession, Spain had no VAT system with a right of deduction, so the introduction of the exclusion did not materially change the position of taxable persons.
The Court confirmed that excluding VAT deduction on representation expenses aligns with the intention of the EU legislator, rejecting Randstad’s challenge regarding business gifts.

The ECJ ruled that Spain’s exclusion of VAT deduction for entertainment expenses, introduced at the time of its EU accession in 1986, is permissible under the “standstill clause” (Article 176 paragraph 2 of the VAT Directive).
Even though Spain did not have a comparable VAT system before accession, the court found that the new exclusion did not unlawfully extend the scope of pre-existing restrictions, as the situation for businesses did not materially worsen.
The judgment affirms that exclusions for entertainment expenses align with the VAT Directive’s objectives due to their non-strictly professional nature.