New Case Law in Spain: Value Added Tax on Amateur Sports Events

Published on 12 August 2022

Spain is known for its love for sport, both at the professional and amateur levels, leading to outstanding achievements in a wide variety of sports in the recent past. In this regard, we are pleased to report on new case law from the Madrid High Court of Justice (Tribunal Superior de Justicia de Madrid) which deals with the VAT levied on amateur sporting events. In fact, in this case I was fortunate enough to serve as the lawyer responsible for filing suit against the Spanish tax authorities.

Gustavo Yanes Hernández Tax Lawyer +34 91 319 96 86

The lawsuit in question mainly focused on the VAT rate applicable to the sale of a right to participate in amateur motorbike races on Spanish tracks enabled for such purposes. The company organised participation “packages” aimed at amateur drivers seeking to participate in such races; the participation package included insurance, medical care, training, assistance, etc. This company submitted a so-called “binding query” to the Spanish Directorate General for Taxation (“DGT”) to determine the tax rate applicable to these races.

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

In the course of a tax inspection, the plaintiff appealed the tax authorities’ decision on the grounds that the Spanish Law on VAT does not foresee that the reduced rate should apply only to the sale of tickets to events. In this respect, it was argued that the regulations should be interpreted in accordance with Art. 3 of the Spanish Civil Code, i.e, in a literal manner. It was and continues to be evident to us that the article governing the reduced VAT rates (Art. 91 of the Spanish Law on VAT) 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. Moreover, a comparison with other regulations on reduced VAT rates (e.g. those applying to the organisation of fairs and exhibitions) and their interpretation by the DGT revealed an obvious disparity in the tax authorities’ own criteria (not backed by law), leading to undue distortion of competition.

The ruling of the High Court is not yet final (i.e. unappealable) and the tax authorities may in fact appeal to the Supreme Court. This is possible given that this judgment modifies the DGT’s policies in such a way as to result in loss of revenue for the State. Our hope is that no such appeal is lodged but that the new interpretation is upheld — this would help promote amateur sporting events, which have a very positive impact on Spanish society.