We are pleased to announce that the new Spanish tax legislation will certainly help attract more meetings and corporate events to Spain, especially as budgets are increasingly important when the time comes to take the decision about a destination.
From January 1st, a new tax legislation will become effective in Spain (except the Canary Islands which have a special tax status within the EU).
From now on, clients who contract a Spanish DMC to organize their meetings in Spain will have significant savings as the new law allows (in certain cases) the DMC to issue invoices exempt from VAT, providing they take care of and invoice for ALL the necessary services.
With this new legislation it will be easier and more cost effective to book all required services via a local DMC as it will not be necessary to start a tax rebate process as the DMC will be able to invoice net rates with 0% VAT.
In which cases is it possible to get the mentioned tax refund or invoice with 0% taxes?
In cases where the DMC provides all the necessary elements for the organization of an event; what the tax authority calls a “Servicio Complejo de Organización de Eventos (SCOE)” which means “a complete service of event organization”.
Meetings and events which are considered SCOE will be invoiced with 0% taxes (including services within the conference hotel).
Let us see some examples about the possible savings based on a total cost of 1.000.000€.
If the client reserves the hotel directly and the DMC takes care only of the ground services, the DMC has to invoice the VAT taxes which for the client is an additional cost for the whole program BUT if the client reserves all services, including the hotel, via a DMC it is a SCOE and ALL items can be invoices with 0% VAT taxes
What could be the economic impact considering this new law:
Option A: The client books directly the hotel
- 350.000€ invoiced by the hotel + 10% VAT taxes = total 385.000€ (B&B and F&B)
- 250.000€ invoiced by the hotel + 21% VAT taxes = total 302.500€ (AV and Meeting space)
- 300.000€ invoiced for ground arrangements + 21% VAT taxes = total 363.000€ (staff, venue hire, AV)
- 100.000€ invoiced for ground arrangements + 10% VAT taxes = total 110.000€
The client will have paid 687.500€ to the hotel and 473.000 for ground arrangements. The total cost of the event will be 1.160.500€
Option B: The client books everything via the DMC
The event considered a SCOE: the DMC will invoice with 0% VAT taxes.
The total cost of the event will be 1.000.000€ saving the cost of the VAT taxes with a total of 160.500€!
It is important to know that this new legislation is applicable for B2B transactions and in each case, an expert DMC has to evaluate and decide if the new law applies.
Of course, the VAT does not vanish into the air as the DMC still is obliged to pay it to their various suppliers and then has to claim it back from the Tax Authority, which may take some time. So now, it is more important than ever to work with a financially sound DMC.