Is a dinner with a potential client a deductible expense

What if you decide to give your employees a seasonal company dinner? Or some Christmas presents like a holiday? (By Limit Consulting)

These are some of the types of expenses that fall in the grey area because they present an considerable amount of doubtful expenses. So, what does the law say and what are some measures that will ensure that your legitimate expenses are not contested?

Spanish Corporation Tax, allows the deduction of expenses such as the “acquisitions of gifts to clients or suppliers with a limit of 1% the turn-over”. This means that if
you have a turn-over of 50,000€ in 2017, your deductible expense as gifts and special attention to clients is 500€. The challenge, however, is proving that the invoice of that sizable dinner is actually related to one of those concepts.

It is the responsibility of the company or business to prove that these expenses fall under the above mentioned categories. It is not sufficient simply to present the invoice of the restaurant in order to have the expense offset. Of course, at the time of accounting for the invoices and submitting your results hardly anybody is going to object to that (possibly your accountant will advise you not to do it without proper justification).

However, if you ever have to face a tax inspection these will be the first invoices to be disallowed from your books! Remember, that when an expense is removed from
your calculation, you do not only have to pay back the difference in the resulting tax liability, but you also are going to be fined for There is no particular strategy to follow.

However, the idea is to provide as much information as possible along with the invoice to help justify the expense with the resulting sale or service.

1. If you are having a dinner with a potential client, ask the restaurant to note down on the invoice the name of your client. That information, along with the date of the invoice, together with the contract or your invoice to your client will connect the two events.
2. If you are having a dinner with a regular client that you visit periodically in another town, the above-mentioned information will surely be complemented with some travel expenses to that town.
3. Your dinners will always have to be on working days. Likewise, if you decide to give a gift to some of your good clients, make sure that you are able to justify the expense. Perhaps you could attach to the invoice a copy of the official company’s letter (or gift card) that you addressed to the client with the gift.

These measures do not guarantee that the tax inspector will not have any doubt but they will increase your likelihood of success in proving your case.

Limit Consulting
Business Legal, Accounts & Tax Consultants, Calle Miguel Delibes, 9, 29692
+34 951 087 937
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