On 12 October 2026, the Spanish Supreme Court ruled that SMEs and self-employed taxpayers may deduct input VAT on goods or services purchased and subsequently recharged to another business at cost (without profit margin). The Court held that the absence of a commercial margin does not convert the transaction into a non-taxable gift; it remains a taxable supply for VAT purposes, entitling the intermediary to deduct the upstream VAT.
Key Takeaways
- Cost-Recharge is Taxable: Invoicing at cost to another business constitutes a supply of services/goods for consideration, enabling VAT deduction on related inputs.
- Anti-Avoidance Limit: The deduction is denied only if the arrangement is a simulated gift or lacks economic substance; genuine cost recharges qualify.
- Refund Opportunity: Taxpayers who were previously denied deduction on such transactions can file rectifying returns within the four-year statute of limitations.
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