Introduction
When we speak in Spain of deduction of expenses for self-employed workers, we refer to the two taxes on which a reduction can be obtained: the Personal Income Tax (IRPF) and the Value Added Tax (IVA).
Personal income tax is a progressive tax levied on the income of individuals. Employed workers are taken off their payroll each month. In the case of the self-employed, they must withhold a small amount on each invoice they issue. Both employed and self-employed workers have to make the annual income statement to balance the amounts. IVA is a direct tax that taxes consumption and is added to the amount of each item or service for sale.
This tax affects self-employed workers in two ways: they have to pay VAT on the goods or services they acquire to carry out their activity (input IVA) and it will also be added to the goods or services they sell to their customers (output IVA). ). At the end of each quarter, the self-employed must deliver to the Treasury the IVA that they have collected from their clients and, in return, they will be able to recover the IVA that they have paid when acquiring goods or services for their professional activity.
IVA: Deduct the expenses of your professional activity
Every self-employed person in Spain can deduct VAT on the expenses necessary for the development of their professional activity. This is a very positive aspect but also a sometimes complex issue to apply accurately because the VAT law is general and the weight of its interpretation falls on the self-employed person or their manager or legal advisor.
There is no exact list of deductible expenses, but articles 92, 93 and 94 of the aforementioned law establish that any expense that is closely linked to the worker's activity is deductible. Expenses that do not strictly conform to the professional activity may be rejected or subject to investigation by the Treasury. This is stated in article 95 of the VAT Law in point 1: “Businessmen or professionals may not deduct the fees borne or paid for the acquisitions or imports of goods or services that do not directly and exclusively affect their business activity. or profession”.
For example, if you are a computer programmer and you buy software, a computer or an ergonomic chair, they will be deductible products for VAT purposes. If you intend to present the invoice for a refrigerator or a dining table with 6 chairs, it will probably not be accepted, but it will be valid if you have a hospitality business.
What expenses can I include in personal income tax and VAT?
• Materials and goods necessary for the development of the activity that have been acquired in the current quarter.
• Management services, advice, lawyers or other independent professional expenses that are necessary for the professional activity of the self-employed person. It is one of the most common because the self-employed usually go to them to ask for guidance or to take their accounting.
• Living expenses. In order for these worker's allowances to be considered deductible expenses, they must be produced outside the home, paid by card and have an invoice. Section c of article 11 of the law, where the maintenance deduction is collected, indicates that the taxpayer's maintenance expenses "will be deductible provided that they occur in restaurant and hotel establishments and are paid using any electronic means of payment, with the quantitative limits established by regulation for the allowances and allowances for normal maintenance expenses of the workers”. The self-employed person may deduct 26.67 euros per day (48 euros abroad) when he does not spend the night and 53.34 euros per day when he spends the night in Spain and 91.35 euros abroad.
• Meals: Dinners with clients that occur outside business days and hours will probably be subject to inspection. A meeting with a client at lunchtime falls within your expenses, although depending on the type of activity this will be more easily allowed or not.
• Computer, printer, hard drive or other peripherals. If the cost of the computer is more than €800, you will have to amortize it for a number of years.
• Purchase of a vehicle (up to 50% IVA). Half of the VAT on the purchase of the vehicle can be deducted, practically without any problem. The Tax Agency usually assumes a 50% affectation automatically in the purchase of the vehicle. Following this same scheme, the self-employed could deduct 50% of the fuel or 50% of the repair expenses, although it is not always admitted as a deductible expense.
• Online and offline advertising and business cards. The costs for advertising or making your brand or that of your business visible are deductible. If, for example, a freelancer hires a campaign on Facebook Ads (or Instagram, Google, etc.) or in another type of advertising format to give visibility to his business, he can include these expenses in his self-assessment as deductibles. You can also deduct VAT from the costs of your business cards.
• Attendance at fairs or other events in your sector. As long as they are directly related to the sector and their relationship with the business can be justified, they will be deductible.
• Business trips to get clients, meet with investors, attend conferences... In short, any trip that is 100% professional.
• Subscriptions to professional magazines. As with attendance at fairs and events, registration and magazine fees, or even information websites, will be deductible.
• The self-employed fee itself is one more expense, so you can include it.
• Training. Private courses to train workers in their sector will be deductible.
• Internet and office landline. Telephone lines or internet connection that are contracted only for an office or commercial premises will be classified as deductible expenses. If it cannot be proven that they are for professional use only, it will be more difficult to be accepted.
• Your billing and other necessary software.
• The domain of your web page, hosting, software license, web design.
• Home: If you develop all or part of your activity in your rental or purchase home, you can also deduct the proportional part of the space you use for it. This includes the proportional part of the rent or mortgage payment, community expenses and supplies (electricity, water, gas).
• Mobile phone. A self-employed person finds it difficult to justify that he uses the mobile phone only for his professional activity unless he has hired it as a professional line independent of the domestic one.
• Workwear. Experts distinguish between clothing that is specific and specific to a profession and clothing that is not. In this section, the interpretation of work clothes is very conservative and fits, almost exclusively, to uniforms. In other words, if for your work you work in front of the public or before an online public and you consider that you have to change your wardrobe frequently, it will not be considered as a deductible expense.
• Travel expenses, taxis or displacements with the private vehicle, including parking. The expenses associated with the vehicle (fuel, tolls, parking...) are often difficult to prove that they have been incurred for a reason attributable 100% to the professional activity of the self-employed worker.
• Private mutual health insurance: If the worker has contracted it apart from Social Security, it can also be deducted.
• Contributions derived from the hiring of workers. Wages and salaries: workers' salaries, extraordinary payments, travel expenses, allowances, compensation in kind, prizes, compensation.
• Loan interest: all interest charged to you is deductible as extra expenses related to your work. You will need the supporting documents.
• Depreciation: amount of impairment or depreciation of investments considered as tangible or intangible fixed assets assigned to the activity.
Evidence to justify that an expense is deductible
Any documentary evidence can be useful to prove that you have been somewhere to eat at a work meeting, that you have sent a business gift to a client, that a piece of furniture or item has been purchased for your workplace, etc.
• A whatsapp, SMS, phone call or email sent to a customer
• A photo or video showing attendance at a venue or purchase of a good for your workspace
• A voice message informing the manager or lawyer of an upcoming appointment
• A bank transfer or proof of payment by Bizum/Paypal/etc
• A parking ticket with license plate registration
• A post or message published on social networks to organize an event.
• Geolocation of the phone or vehicle to prove a trip or displacement to a specific place
Contact us
For any questions regarding being self-employed in Spain, contact us below. We have a self-employed registration service where we manage everything and do all the paperwork so that you only have to concern yourselves with your work. We can also take care of your accounting and tax returns. Write to us at [email protected] and ask for a no-obligation quote. All our services can be performed done online:
