Coronavirus Takes Bite out of Spanish VAT Collection

When Mobile World Congress, the telecom industry’s largest and most important event, was cancelled earlier this month due to fears over the coronavirus, it did more than simply cancel an event. It wiped out an expected half-billion-dollar influx into the Spanish economy.

That means a lot of empty hotel rooms over the course of the week. Restaurants that were booked months in advance will look at open tables. Meanwhile, taxi drivers, temporary workers, and others involved in the event will see significant revenue drops this quarter.

Spain, with a standard 21% VAT rate, will also take a hit. Based on last year’s £420M spent by visitors during the week, the government can expect to miss out on over £82M in VAT payments this quarter. That’s money that the government built their budgets around, which may lead to government programs being reduced or cut.

How Should Companies Respond?

Despite the challenges that may face Spain, many businesses based outside of Spain are in position to reclaim the VAT portion of their investment.

Businesses that have already invested hundreds of thousands of dollars in non-refundable booth design should increase their efforts to reclaim VAT payments. Rather than write off the entire 2020 MWC expenditure as a loss, they can reduce the hit taken on their budget by filing for and reclaiming money spent on design and construction. It won’t make up for all the cancelled meetings and time spent on the event, but it will allow marketing budgets to recoup some of their wasted investment.

What Companies are Eligible to Reclaim VAT?

While many foreign-based companies are eligible to reclaim and recover VAT, the Spanish tax authorities do place some limits. Companies that are based in the European Union are all eligible to reclaim VAT. However, companies that are outside of the European Union are only eligible if there is a tax reciprocity agreement between Spain and their home country. For companies based in an area without reciprocity, such as the United States, VAT is unrecoverable.