Definitive Guide to Deductible Expenses for the Self-Employed

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As a self-employed person, having a thorough understanding of your deductible expenses can make a substantial difference in your tax return. Spanish tax legislation offers multiple opportunities to reduce your tax burden, but it requires precise knowledge and a well-planned strategy.

In this comprehensive guide, we'll unravel all the intricacies of deductible expenses for Personal Income Tax (IRPF), transforming tax complexity into a cost-saving tool for your business.

What Are Deductible Expenses?

Deductible expenses are those financial disbursements that the Treasury allows you to subtract from your income to calculate your taxable income. This isn't a whim, but rather a tax benefit meticulously regulated by tax regulations.

Key Requirements for Deductibility

For an expense to be considered deductible, it must meet three fundamental conditions:

1. Direct Link with Economic Activity

   • It must be directly related to your professional activity

   • In cases such as partial use of the home, you must demonstrate the percentage of affectation

2. Documentary Justification

   • Every expense needs to be supported by an official invoice.

   • Simplified tickets or invoices are NOT valid if they do not include your tax information.

   • Golden tip: Always ask for an invoice!

3. Accounting Record

   • All expenses must be recorded in your accounting books.

   • Keep meticulous control of each transaction

Complete Catalog of Deductible Expenses

1. Essential Materials and Supplies

Purchases of:

• Raw materials

• Office supplies

• Fuels

• Packaging and packaging

Important : Technological and office equipment must be EXCLUSIVE to your activity.

2. Personnel Expenses

You will be able to deduct:

• Salaries and wages

• Extra payments

• Diets and travel expenses

• Employee training

• Accident insurance

• Compensation

3. Social Security and Mutual Societies

Includes:

• Contributions to the Special Regime for Self-Employed Workers (RETA)

• Contributions to social security mutual funds

4. Operating Expenses

• Rentals

• Repairs and maintenance

• External professional services

• Advisor fees

• Advertising expenses

• Utilities (electricity, water, telephone)

Remember that you can track them all using the InnoTaxes platform for clear control.

5. Financial Expenses

Deductibles:

• Loan interest (the loan must be related to your activity)

• Late payment surcharges

• Discounting expenses for effects

6. "Special" Expenses with Caution

Supplies in Housing

• Maximum deductible: 30% for water, electricity, etc.

• It requires that the home be listed on form 036 as a place of activity.

Diets and Meals

• Deductibles outside the municipality of activity

• Electronic payment required

• Mandatory invoice

• Limits established according to destination (Spain/Abroad)

Vehicle

Only 100% deductible for:

• Passenger transport

• Transport of goods

• Driver training

• Commercial activities

In any other situation, you should not consider vehicle expenses of any kind .

7. Other Interesting Expenses

• Books and professional subscriptions

• Business association fees

• Health insurance (limit €500 per person, self-employed)

Bonus Track: Additional Deduction

The Treasury allows a 5% deduction on expenses that are difficult to justify, up to a maximum of €2,000.

Non-Deductible Expenses: What You Should Avoid

You will not be able to deduct:

• Fines and penalties

• Donations

• Gambling losses

• Expenses with entities in tax havens

VAT Treatment: Golden Rules

VAT is generally not included as a deductible expense because it is managed in a separate settlement, but there are exceptions:

• If you are in the equivalence surcharge regime

• You belong to sectors such as agriculture, livestock or fishing.

• If the VAT on a purchase is not deductible by law: for example, if you buy a car that is not exclusively related to your business, the VAT is NOT deductible, according to Article 96 of the VAT Law. Therefore, this VAT will be added to the value of the item and will be deducted along with the price as a total expense in personal income tax. That is, in this case, the VAT will not be assessed separately.

Conclusion: Get Ready to Optimize

Mastering tax-deductible expenses isn't just a matter of numbers; it's a smart business management strategy. Always keep records, be meticulous, and if you need personalized advice , the InnoTaxes team is available to help you make the best tax decisions.

Contact us now and request your first completely free consultation.