A dinner to land a new client, a multi-day trip to attend a conference or athletics tournament in order to close a deal… These are work-related obligations that, of course, are billable to the company and about which, nobody doubts the invoicing. These are known as representation expenses. It would be better if the employee that carries out such expenses with the aim of representing his company or gaining clients, keeps all the invoices so that misunderstandings can be avoided.

A previous question that needs to be clarified is the difference between "representation expenses" and "travel expenses". In fact, many people get confused with these two terms. But, there is a clear difference between them, ranging from the purpose of the expense to who the expense was for.

• Travel expenses: as the name suggests, these are the expenses incurred from a company-sanctioned work trip. They include travel and lodging expenses, as well as transportation expenses.

• Representation expenses: these expenses are charges incurred in representing the company before customers or suppliers. They are referred to as public relations, generally performed by employees, administrators, directors and other executives of the company, with the purpose of receiving a future business benefit. The main objective is to improve the company’s image and that of its employees.

However, it is true that, in both cases, meals, accommodation and transportation expenses can be included and this is the reason for so much confusion.

It seems clear that meals are included, as well as the transportation and accommodation expenses provided that they are incurred in improving the company’s image and its customer service.

Representation expenses will always adhere to the conditions of nature and purpose that must be shown in case of tax inspection.

Representation expenses are deductible when they meet certain conditions of nature and purpose which the company must prove in case of tax inspection. According to article 14 of the Corporate Tax, deductible expenses would be the following:

• Public relations expenses with clients or suppliers.
• Expenses that, in accordance with their uses and customs, relate to the company's employees.
• Expenses incurred in promoting, directly or indirectly, the sale of assets or the provision of services.
• Expenses related to revenues.

More specifically, and taking into account this classification, the most common representation expenses are:

• Hotel stays for clients.
• Meal invitations to clients.
• Attendance at artistic, athletic and cultural events.
• Presentation of gifts to clients and supplies, participation in lotteries, etc.

Certain expenses are usually considered as representation expenses although they are not. Some companies often include, as representation expenses, certain charges which actually are "liberalities".

Expenses that are not necessary in obtaining revenues, nor whose purpose is the obtaining of future "business profits", such as restaurant expenses with people that are not related to the company, concert tickets for friends, parking or transportation expenses, excessively expensive gifts...

According to these companies, "the concept of 'required expense', included in the corporate tax to determine the deductibility of the expense, is an indeterminate and ambiguous legal concept that allows each company to interpret its meaning in the most convenient way".

The good news is that a sentence was passed in Catalonia in September 2008 that says that it is not necessary to provide a full and individualized expense report. The High Court of Catalonia has opened a favorable route that will give companies a wide margin within which to prove their expenses before the courts. In this regard, the Courts of Catalonia have given a wider, more lenient definition to representation expenses. The expenses spent by directors on trips, tolls, dinners or invitations may be tax deductible in a large manner from the Corporate Tax because it is not essential to submit a complete or individualized invoice.