New case law in Spain: Value added tax on amateur sporting events

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Spain is known for its love of sport, both at professional and amateur level, which has led to outstanding achievements in a wide variety of sports in the recent past. In this regard, we are pleased to inform you of a new case law of the Superior Court of Justice of Madrid (Superior Court of Justice of Madrid) which deals with VAT levied on amateur sporting events. In fact, in this case, I had the good fortune to be the lawyer in charge of bringing an action against the Spanish tax authorities.

The lawsuit in question mainly concerned the rate of VAT applicable to the sale of a right to participate in amateur motorcycle races on Spanish circuits authorized for such purposes. The company organized participation “packages” intended for amateur pilots wishing to participate in such races; the participation package included insurance, medical care, training, assistance, etc. This company has submitted a so-called “binding” request to the Spanish General Tax Directorate (“DGT”) to determine the tax rate applicable to these races.

The various services included in the participation package have been classified as “amateur sporting events”; however, the Spanish tax authorities refused to apply a reduced rate of 10% even though this was legally provided for. They did this because, according to the policy of the Spanish tax authorities, the reduced rate does not apply to activities related to the organization of sporting events or competitions, but only to the entrance fee (this is i.e. the right of access) to these events.

During a tax audit, the claimant appealed against the decision of the tax authorities on the grounds that Spanish VAT law does not provide that the reduced rate only applies to the sale of tickets for events. In this regard, it was argued that the Regulations should be interpreted in accordance with Art. 3 of the Spanish Civil Code, that is, literally. It was and continues to be obvious to us that the article governing reduced VAT rates (art. 91 of the Spanish VAT law) does not expressly state that this tax incentive is limited to the sale of tickets to the public, that is, to the spectators of such events. Furthermore, a comparison with other regulations on reduced VAT rates (for example those applicable to the organization of fairs and exhibitions) and their interpretation by the DGT revealed an obvious disparity in the criteria specific to the tax administration (not backed by law), leading to distortion of competition.

The decision of the High Court is not yet final (i.e. without appeal) and the tax authorities can in fact appeal to the Supreme Court. This is possible given that this judgment modifies the policies of the DGT in such a way as to result in a loss of revenue for the State. Our hope is that no such appeal will be filed but that the new interpretation will be upheld, which would help promote amateur sporting events, which have a very positive impact on Spanish society.

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