Client’s Situation
A marketing company underwent a selective Corporate Income Tax inspection conducted by the Spanish Tax Authority (Hacienda). The Tax Authority disallowed: representation expenses, part of travel and business trip costs, consultancy services. The total additional tax assessment amounted to €210,000, plus a 50% penalty. The inspection argued that the expenses were insufficiently substantiated and not directly related to the company’s economic activity.
Problem
In Spain, the Tax Authority frequently applies a formalistic approach: if documentary support is considered incomplete, expenses may be classified as non-deductible.
Our Strategy
Prepared a defence demonstrating the business purpose and economic justification of the expenses. Submitted supporting documentation, including: contracts, meeting reports, travel tickets and supporting receipts, business correspondence, commercial proposals. Relied on established case law applying the principle of “correlation with business activity”.
Result
More than 70% of the expenses were recognised as deductible. The penalty was reduced. Total financial savings amounted to approximately €160,000.
