Deductible Expenses If You Work at Home
Deductible expensesTax Agency (Hacienda)
For just over a year, much controversy has arisen over the deductible expenses if you work at home. Most of them related to housing where a freelancer or professional carries out their activity.
Everyone will think that it is coherent that a shoemaker who has a small place where he works as a craftsman can deduct the electricity, water, gas, telephone, and Internet related to that place as an expense of his activity.
But what about the illustrator, the computer scientist, the translator, or any other professional who uses a room in their home. Does it make sense that you can deduct part of the supplies?
The obvious answer is yes, but how much can you deduct? That has been a problematic issue for many years until from 01/01/2018 the Law 6/2017 on Urgent Self-Employment Reforms defined it quite clearly.
In the cases in which the taxpayer partially designates their habitual residence to the development of economic activity, the expenses of supplies of said dwelling, such as water, gas, electricity, telephony, and Internet, will be considered a deductible expense. You should calculate it in the percentage resulting from applying 30 per cent to the existing proportion between the square meters of the house destined to the activity to its total surface unless a higher or lower percentage is proven.
Example applying the 30% deduction
Although we now know what we can deduct, the result of applying 30% to the proportional part of the dwelling used for the activity can be very low. With an example you can check it:
A computer scientist who works from home has a room of 18 m2 set up for his activity. His house has an area of 90 m2. Therefore, the percentage of the surface that he designates to his activity is 20%. What operation will you have to carry out to find out what can to deduct from a telephone and Internet bill that amounts to € 145.00?
€ 145.00 x 20% (percentage of m2) = € 29.00 x 30% (percentage established by the standard) = € 8.70
IMPORTANT NOTE: you can use these deductibility rules only to deduct a proportion of the tax base of the expense, that is, you will not be able to deduct any amount from the VAT of the invoice.
Returning to the previous example, when we talk about the telephony and Internet bill amounting to € 145.00. We are referring to the taxable base of the invoice since the total of that invoice amounts to € 175.45.
The € 30.75 VAT on the invoice is considered non-deductible. The reason for the Tax Agency is as follows: for VAT to be deductible, expenses must be exclusive to the activity, they cannot cover personal and business needs at the same time.
What requirements must you meet to be able to apply these deductions?
1. Characteristics of the space that you designate for the activity
The partial designation must be limited to the part of the property in which you carry out the activity, having to be clearly divisible if you use it for personal needs. This use must be notoriously irrelevant.
That’s why you can’t designate the living room, for example.
2. Communication of the designated part to the AEAT (Tax Agency)
The designated properties must appear in the accounting or official records of economic activity. So you must notify the AEAT, through form 036 or 037, of the space of your home that you are going to use for the development of your activity.
What other expenses can you deduct if you are the homeowner?
Suppose you are the owner of the home in which you develop the activity. In that case, you will also pay the community of owners, home insurance, and IBI. Well, in this case, you can deduct the percentage that represents the existing proportion between the square meters of the house used for the activity to its total area.
Let’s return to the previous example! If the community amounts to € 80.00, you can deduct € 16.00. Usually, these expenses (community, IBI and insurance) are exempt from VAT. So, you can apply the percentage directly to the amount of the expense.
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