On 12 October 2026, the Spanish Supreme Court issued a landmark ruling establishing that the Tax Administration cannot refuse VAT deductions on goods or services acquired by a business and subsequently re-invoiced to another entity at cost price, without any profit margin. The Court clarified that the absence of a commercial margin does not transform the transaction into a non-taxable gift or a non-business activity. This decision reinforces the right to deduct input VAT where a clear economic link exists between the purchase and the onward supply, regardless of the pricing policy applied.
Key Takeaways
- Cost Pass-Through Does Not Negate Deduction: Re-invoicing at cost price preserves the business nature of the transaction, securing the right to deduct input VAT under the general VAT Directive principles.
- Precedent for Client Hospitality Expenses: The ruling specifically addressed purchases destined for client hospitality later recharged at cost, setting a precedent that such recharges constitute taxable supplies for VAT purposes.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement