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

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.

Think Your Entertainment Expenses Are Deductible? The CJEU Says Think Again!

The European Court of Justice (ECJ) confirmed that Spain can deny input VAT deduction for entertainment and hospitality expenses, even when these are linked to taxable business activities.
The ruling in the Randstad España case (C-515/24) centered on Article 176 of the EU VAT Directive, the “standstill clause,” which permits Member States to maintain historic VAT deduction exclusions that were in place at the time of their EU accession.
This decision highlights that businesses should meticulously review their VAT recovery policies for entertainment costs, as these expenses, though potentially deductible for corporate tax, may result in irrecoverable VAT due to varying national rules and the ongoing lack of full VAT harmonization across the EU.