Most Common Deductible Expenses for Self-employed in Spain
The best way to save on taxes is not to miss out on the most common deductible expenses in the development of your activity. Of course, there are many specialities in the deductibility of expenses and activities.
Still, some expenses are usually the most common. And this is the purpose of this article: to relate the most common expenses, so you don’t forget and include them in your accounting.
- What is a deductible expense?
- Purchases of goods
- Fixed assets (amortizations)
- Contributions to Social Security or Professional Mutuality (Mutua)
- Leases (premises or personal property)
- Expenses related to vehicles (totally / partially designated)
- Fees of independent professionals
- Supplies (if you have a location designated for your activity)
- Supplies (if you use a room in your home for your activity)
- Financial expenses (financing of loans)
- Health insurance
- Living expenses of the self-employed worker
- Mobile phone
- Expenses related to travel
- Outsourced work
- Representation expenses
- Related Articles
What is a deductible expense?
You can consider a fiscally deductible expense if it meets the following conditions:
1. The expense is an actual operation.
2. That has been made for the attainment of income.
3. You have duly registered it in the expense book.
4. You paid for it in the year in which it happened.
5. The expense is duly justified as a priority by the invoice delivered by the entrepreneur or professional who made the corresponding operation.
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Purchases of goods
In this section, we would include all the purchases of goods consumed in the current year. Specifically, something that everyone uses is office material.
If your activity is manufacturing, you should include the raw materials you need. If you do trade, here you would include the goods for resale.
Fixed assets (amortizations)
Fixed assets are a set of assets you include in the book of investment assets. You hadn’t purchased them for sale and you will use them in your activity beyond a financial year. The most common examples are a computer (tangible assets) or a web page (intangible assets).
Since you will use these goods for more than a year, it makes sense to include them as expenses little by little. And for that, there are tables with percentages of amortization.
With an example, you will get it more clear:
Imagine that you acquire a computer which tax base amounts to € 1,000 since the percentage of amortization of this type of goods is 33%. If you had purchased it on January 1, the amortization expense in that year would be € 330.
Contributions to Social Security or Professional Mutuality (Mutua)
You can deduct Social Security payments, as well as the fees you pay to your professional Mutuality (lawyers, doctors, engineers, architects). In case you use Mutuality, it is an alternative scheme to the RETA.
Leases (premises or personal property)
The most common are expenses for renting premises for the exercise of activity. Rents of movable property, such as renting a photocopier, are also considered deductible.
This section would include fuel, necessary repairs, maintenance costs (ITV), insurance and municipal taxes (IVTM). But it is vital that you know that all these expenses are only fully deductible in Personal Income Tax for the self-employed who dedicate themselves to:
1. Commercial activities (commercial agents)
2. Passenger transport activities (taxi drivers)
3. Freight transport activities (transporters, delivery people, messengers)
4. Driver education activities (driving schools)
For the rest of the self-employed, the regulations do not allow deducing anything from the taxable base of these expenses. However, it does allow a 50% VAT deduction provided that the self-employed can show that the vehicle has partially designated their activity.
Fees of independent professionals
That includes the costs of the financial adviser, lawyers, economists, registrars, and notaries, for all the services rendered to you related to the exercise of your activity.
Supplies (if you have a location designated for your activity)
Suppose you use a place to develop your activity. All the expenses of supplies related to the premises will be 100% deductible if the receipts are in your name.
Supplies (if you use a room in your home for your activity)
Suppose you designate your habitual residence to the development of economic activity. In that case, you can deduct the expenses of supplies of said dwelling, such as water, gas, electricity, telephony and Internet, in the resulting percentage of apply 30 percent to the existing ratio between the square meters of the space for the activity concerning the total area of the house.
After many years of uncertainty about what and how much can be deducted by a self-employed person working at home, we now know what we can deduct. However, the result of the amount to be deducted after applying the percentages is minimal. You can check it with an example:
A software developer who works from home has enabled a room of 18 m2 for his activity, having his house an area of 90 m2. Therefore, the percentage of the surface that it allocates to its activity is 20%. What operation will you have to perform to know what 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 regulation) = € 8,70
IMPORTANT NOTE: you can only use these deductibility rules to deduct a proportion of the taxable base of the expense. That is, you will not be able to deduct any amount from the VAT of the invoice.
Suppose you are the owner of the home in which you develop your activity. In that case, you will also pay the community of owners, housing insurance and IBI. In this case, you can deduct the percentage of the proportion between the square meters of the house intended for the activity with respect to its total area.
Financial expenses (financing of loans)
Suppose you have used some financing to develop your project. In that case, the loan interests and commissions charged to you by the financial institution are also considered deductible.
The tax-deductibility of insurance costs is limited exclusively to health insurance and only in the part corresponding to sickness or healthcare coverage. It cannot be extended to different insurance, such as accident insurance, or to different coverages.
The holder’s health insurance payments, spouse, and children under 25 years of age, up to the maximum amount of € 500 per member per year, are considered deductible expenses.
On the other hand, you may need or require a civil liability insurance policy to develop your activity. In this case, this insurance would also be deductible.
Living expenses of the self-employed worker
That has been another controversial expense for deductibility by the self-employed until 2018. The rule clarified what type of expense and amounts could be considered deductible.
The requirements that these expenses must meet to be deductible are:
1. They must be produced in business days.
2. They must be produced in restaurants and catering establishments.
3. They must be paid by any electronic means of payment (card or transfer).
4. The invoice must be kept, indicating the day, establishment and amount.
5. They cannot exceed the quantitative limits established by regulation:
– WITHOUT OVERNIGHT: € 26.67 / day (Spain); € 48.08 / day (abroad)
– WITH OVERNIGHT: € 53.34 / day (Spain); € 91.35 / day (abroad)
To deduct the invoice for your mobile phone, you must have a specific telephone line to develop your activity. Otherwise, the Treasury will not allow you to include that invoice in your expenses.
Suppose you are a professional who must often travel to visit your customers and have to bear transportation and accommodation costs. In that case, you can relate these expenses to your activity. However, you should follow a series of precautions since the Administration is strict about accepting them.
The important thing is that you can show that these expenses are related to your activity, so the first thing is to collect evidence to prove that these expenses are yours.
It is essential to obtain an invoice in your name whenever possible, save the ticket and pay whenever you can with a credit or debit card.
Besides, to prove that they are related to your activity, we advise you to follow these precautions:
1. If you travel by taxi. Ask the taxi driver to register on the bill your name, date, time, and the journey made to see the purpose of the trip and that it was related to the activity.
2. If you travel by bus, metro or train. It will have to be during working hours since Hacienda only considers the related trips in those hours as related to the activity, so you can deduct tickets and transportation vouchers that reflect the date and time of use and that are in that time interval.
Finally, we leave you with the best solution for demonstrating the deductibility of these expenses. If possible, try to have your fees broken down in the invoices you issue to your customers. Apart from that, the expenses for food, stay, and transportation you have had to bear for providing the service billed, as expenses incurred by your account. If you do so, the Treasury will not question that these costs are related to your activity since you will have incurred them on your customers.
Suppose you subcontract part of the work you do as a professional because you have to meet deadlines or have had a flood of customers. You can consider deductible those expenses.
Nowadays, many self-employed workers use Internet advertising to make themselves known. One of the most used services is Google Ads. You can consider deductible both the invoices of Google and those of any other company that charges you for advertising your services.
What professional has not closed business or contract after a meal with a client? And, of course, the client expects you to invite. In these cases, you can deduct both his food and yours, regardless of the restaurant’s location, since customer care is deductible.
Even so, the expense assumed should be reasonable and sporadic, and you should also ensure that the bills or tickets show that there were several partakers.
With Self-Employed Spain’s platform, you can include all these expenses and much more. Besides, the platform calculates the percentages of supplies automatically, so you don’t have to perform complex calculations. You can access and try the platform for 10 days for free.
If you have any questions, get in touch with us.
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