On 12 March 2026, the Court of Justice ruled in Randstad España (C-515/24) that Spain's exclusion of VAT deduction on gifts and entertainment for clients is compatible with the VAT Directive.
The case
In 2009 to 2011, Randstad España bought tickets for football matches of Real Madrid and FC Barcelona, invitations to the Paddock Club at the Formula 1 Grand Prix of Spain and invitations to trips on board a ship, and gave them to its clients for free. It deducted the VAT. The Spanish tax authority refused, and relied on the standstill clause in the second paragraph of Article 176 of the VAT Directive.
Under that clause, Member States may keep exclusions from deduction that their law provided for at the time of accession. Randstad argued that the Spanish rule did not qualify, because it was not in force before accession. Spain had no comparable VAT system before it joined on 1 January 1986.
The ruling
The clause does not preclude a national rule that enters into force on the date of accession and excludes deduction on such spending. The Court pointed out three things:
- The rule did not change anything in practice for businesses, since they could not deduct such VAT before it took effect either.
- Excluding entertainment spending fits the logic of the VAT system, given its close link with private needs.
- The rule was precise enough. It was not a general exclusion.
The Court also noted that it does not matter that the same costs are deductible for income tax. That tax is not harmonised and has other aims.
What to check
- Corporate hospitality is a frequent source of VAT errors across borders. Check the rule in each Member State where you buy tickets or gifts.
- The Court did not answer whether a proven business purpose could make a difference, because the standstill clause already decided the case.
- The rule on income tax says nothing about the VAT position.
mr. J. el Khalfioui LL.M.