If you are self-employed in the simplified direct estimate system, you will surely be interested to know what expenses are considered tax deductible in the Spanish Income Tax Forms, as well as what kind of VAT can be deducted.
Deductible expenses on the Spanish Income Tax
The Spanish Income Tax law establishes that the expenses required for the development of the activity are deductible, as long as there are justified and recorded in the mandatory accounting books.
There are expenses that we consider deductible without hesitation; such as the autonomous quotas paid to the Social Security, the office material, the advisory fees or the rental of the business premises.
However, we must take into account some special rules that we detail below:
Maintenance: The expenses of maintenance of the taxpayer are considered deductible for income tax purposes provided they are made in a restaurant and catering establishment and paid by credit card. This last point is important, because if the payment is made in cash, it would not be accepted.
However, the following maximum limits must be taken into account are the follow:
€/day NOT STAY OVERNIGHT STAY OVERNIGHT
SPAIN 26,67 53,34
ABROAD 48,08 91,34
Normally, the most common expense is the daily menu that you do next to the office, in which the limit of 26.67 Euro would operate as a maximum to be considered a deductible expense.
On the other hand, the expense of public transport will be deductible as long as it is carried out in a different home-work shift, and that is justified with an invoice.
Housing Supplies: This is when you have a part of your house affected to the activity. You can deduct the supply cost (water, gas, electricity, telephone) in the percentage of applying 30% to the ratio between m2 affected to the activity and total m2 of the house.
The expenses derived from the ownership of the property (IBI, depreciation, Community of Owners) are deductible in the proportion of the m2 affected and the percentage of ownership.
Contribution to social security health mutual funds: They can be taken into account as a deductible expense for income tax purposes as long as it is an alternative to Social Security.
For example, the special regime of lawyers or architects will be deductible in the part that covers the contingencies covered by Social Security, but not the part destined for retirement.
Health insurance: Fees paid in concept of health insurance for taxpayers and their partner and children under the age of 25 living with them are deductible, with the following limits:
- € 500 for each of the persons mentioned above
- € 1,500 in the case of disability.
Depreciation: The fixed assets will be amortized according to the lineal depreciation table approved by the Ministro de Hacienda y Administraciones Públicas. On the amounts of amortization resulting from these tables, can be apply the rules of the special regime of small-sized entities provided for in the Corporate Tax Law. That’s to say that if you fulfill all the requirements you can apply the double of the % of amortization that this table establishes.
Deductible expenses on the Value Added Tax
As a general rule, the VAT quotas paid in the exercise of the economic activity are deductible for deliveries of goods, services, imports … exclusively affected at the business activity and justified by invoice.
However, the following details must be taken into account:
Vehicles: Vans, taxis or the car of commercial agents are considered to be totally dependent on the business activity. However, cars are affected to the activity by the 50% (if you don’t prove any other affection).
The VAT quotas of the repairs, fuel, toll or parking can be deducted at the same percentage that the car is affected to the business activity.
The same rule is applicable for the rest of investment assets that are partially affected by the activity, such as a mobile phone.
Travel, restaurant and catering: These expenses will be deductible as long as there are deductible in the IRPF.
What expenses are not deductible?
Below are some of the expenses that are not fiscally deductible, according to the Law on Value Added Tax:
- Food and drinks.
- Entertainment services.
- Services designed to serve customers, employees or third parties.
- Travel services, hotels and restaurants. EXCEPT when are deductible in IRPF.
- Clothing (except in the case of uniforms).
- The housing supplies expenses, although be deductible en IRPF.
As you can see, the regulations of both taxes are different, and sometimes it is difficult to know if you are applying correctly the deductions. In GM Tax we are at your disposal to help you in fulfilling your tax obligations.
