Deductible expenses for the self-employed for personal income tax purposes
Requirements to be able to deduct VAT on expenditure
Deductible expenses for self-employed income tax purposes are those that meet the following conditions:
- They are directly related to the professional activity in question.
- They are supported by officially valid invoices.
- They are duly recorded in the accounting books.
The most common VAT-deductible expenses for the self-employed
- Operating expenses: Purchases of stocks, goods, merchandise, raw and auxiliary materials, fuel, packaging and office supplies. The purchase of any material that is necessary for the development of the business activity.
- Social security: Contributions of the self-employed and employees.
- Mutual benefit societies: 50% of the contribution for common contingencies may be deducted.
- Wages and salaries of workers, including allowances, payments in kind, extra payments, prizes and indemnities.
- Other personnel expenses such as training, accident insurance, gifts or contributions to pension plans.
- Professional services of lawyers, consultants, notaries, auditors, managers and the commissions of business representatives.
- Investments in research and development.
- Electricity, water, gas, telephone and internet supplies if you have premises or an office.
- Advertising and public relations.
- Website, domain and server.
- Leases: Rental of real estate (premises, land, industrial premises to carry out the activity) or furniture (computers, printers, televisions, etc.).
- Royalties: Amounts paid for industrial property, such as patents, licences, etc.
- Repairs and maintenance: Expenses for the maintenance and repair of installations, provided that they do not involve improvements or extensions. Also the maintenance, replacement and adaptation of business machinery.
- Leasing or renting of goods necessary for the activity.
- Financial expenses derived from the payment of interest on credits and loans, surcharges for deferring the payment of debts and late payment interest on deferrals to the Tax Agency.
- Depreciation of movable and immovable assets: machinery, hardware, owned premises.
- Impairment losses on assets.
- Tax deductible taxes: IBI or IAE, among others.
- VAT borne by self-employed workers who do not file quarterly VAT returns, such as those who are under the equivalence surcharge or activities that are not obliged to pay VAT.
- Fees for business associations, corporations and chambers of commerce.
- Documentation: Books and subscriptions to professional journals.
- Events related to the activity such as courses or congresses.
- Insurance premiums: Civil liability insurance, protection against theft or fire in the business, health insurance for the self-employed, their spouse and children under the age of 25 who live in the family home, with a maximum of 500 per person.
- Expenses that are difficult to justify with an annual maximum of 2,000 euros.
- The self-employed in normal direct estimation can also deduct uncollected invoices issued and expenses due to refunds.
Special or conflicting deductible expenses
These expenses are those where there is both professional and personal use, making it difficult to differentiate between the frequency of use in work and private activities. For this reason, the Tax Agency requires documents that justify the percentage of professional use of these expenses.
- Office in your own home: You must notify this when you register as self-employed using form 036 or 037 and indicate the percentage of the home that you will use for your activity. The normal figure is between 10 and 40%. You will be able to deduct the cost of rent and utilities (electricity, water, gas) from this percentage.
- Office in rented accommodation: Much more complicated to justify as you will have to have two separate invoices, as the rent for the professional part must include VAT.
- Telephone: The Tax Agency allows 50% of the expense to be deducted. Therefore, if your professional expenses exceed this percentage, it is advisable to have two telephones, one for your professional activity and the other for your personal life.
- Vehicle and associated expenses such as petrol, maintenance, insurance: Fully deductible for professionals who use it as a work tool. If the vehicle is rented, as with housing, two different invoices are required.
- Travel and subsistence expenses: Travel expenses on public transport (including taxis), hotel stays and meals (lunches, dinners). The professional nature must be justified.
- Clothing expenses: Only for uniforms, protective clothing and other clothing with the logo of the business.