Representation expenses are those arising from the professional activity of employees when they are required to to carry out the representation of the company, for example, to a customer or a supplier. These costs are often closely related to travel costs or travel expenses, although they are broadly different costs.
Representation expenses are those expenses expenditure associated with the activity of employees and which derive from the action of representing the company in a specific place or activity. For example, expenses arising from having to invite a customer to lunch, expenses arising from a meeting, or expenses arising from a gift to customers or suppliers are considered to be entertainment expenses.
These are expenditures that are usually linked to travel or travel expenses, as they are, In many cases, these expenses are incurred during a journey. However, it is important to distinguish between them, as they are considered by the law as differentiated costs and with their own characteristics. Furthermore, it should be borne in mind that entertainment expenses are expenses which, in many cases, are deductible. Although it must be considered that deductible entertainment expenses may not exceed 1% of the company's net income, For this reason, it is important to differentiate them correctly from travel expenses.
The Corporate Income Tax Act establishes that entertainment expenses shall be understood as those expenses of the company derived to generate income for the company. This very generic definition does not narrow down very much which expenses can be considered as such, so that there are six categories that are usually associated with entertainment expenses, which makes it easier to identify them:
In order for an expense to be considered as a representation expense, and therefore to be deductible, it is necessary that the expense is duly justified. That is to say, that the corresponding invoice or ticket so that it can be properly accounted for in the profit and loss account of the year in which it is to be deducted.
Since it is necessary to have the corresponding invoice or ticket for the expenditure, this implies having to keep a recording of all potentially deductible expenses, The Commission shall ensure that none of them is lost and that none of them is without the relevant document which must be presented to the Tax Agency for subsequent deduction.
Due to this need to keep an exhaustive control of all the expenses incurred and their corresponding invoices, more and more companies are using tools that allow them to automate and digitise such tasks. An example of such a tool is Corporate, the tool for Edenred for the management and control of companies' business expenses.
Corporate allows digitising expense notes and recovering VAT in a quick and easy way. In addition, by digitising receipts and invoices, avoids having to keep the original document in physical form, This reduces the volume of documents to be kept and prevents them from being misplaced. In fact, another of the advantages Corporate offers is that integrates and unifies expense notes and reports directly into your company's system, This makes the whole process considerably faster and facilitates the search for any document or information related to the company's expenses.
