How to reduce your self-employed taxes in Spain?

Self-employed in Spain: How to reduce your taxes? Previously, we published an initial article about the procedures to follow and formalities to respect to become an autónomo (self-employed) in Spain.

New autónomo status holders may feel overwhelmed by the administrative procedures.

To help you develop a better understanding, in this article our lawyers and accountants have set out the deductible expenses involved in being an autónomo in Spain.

What are the deductible expenses?

In general, the expenses that may be deducted depend on the nature of your activity. Deductible expenses are regulated by accounting standards. Some are also expressly excluded by tax regulations. For an expense to be tax-deductible, it must also have been recorded, whether it is registered in the books and is adequately justified (a comprehensive invoice). 

If you are an autónomo and do not know all the expenses you can deduct, refer to our list:

• Operational consumption: Operational consumption is any purchases consumed in the fiscal year 2020, raw materials and other current acquisitions of goods.
• Balances and salary: Where applicable, you can also deduct your employees’ balances, extraordinary payments, daily and living expenses and cash payments.
• Other staff costs: Similarly, in the list of the costs of staff training, you must include contributions to their retirement plan, compensation due to damages suffered by your employees, accident insurance and any other element not considered an act of generosity.
• Social security contributions: Yes, the contributions you pay monthly are also considered a deductible expense.
• Leases and royalties: These are expenses incurred by renting movable or immovable property. But also sums paid for the right to use patents, trademarks and other manifestations of industrial property.
• Repairs and maintenance: All costs incurred and necessary for the maintenance of your property, excluding expansion or improvement costs.
• Services of independent professionals: You will be able to deduct the amounts paid in 2020 to various professionals: economists, lawyers, auditors, notaries, etc.
• Other external services: Such as transport, insurance premiums, banking services, advertising and public relations… Limited to 1% of the net amount of your turnover for the taxable period.
• Tax deductible: There are non-state taxes and surcharges, para-fiscal taxes, duties, surcharges and special contributions that are deductible. For example, the economic activities tax (EIT) and the real estate tax (IBI) levied on items related to the activity
• Financial expenses: Expenses resulting from the use of third-party financial resources necessary to finance the activities of your company, are also deductible.
• Depreciation: The amounts recorded that correspond to the actual depreciation of the various elements of your business for operation, use, enjoyment, or obsolescence are deductible.
• Provisions: Expenses arising from implied or tacit obligations and expenses relating to compensation and other employee benefits are generally not deductible but are deductible if they meet the conditions set out in section 13 of the companies’ tax act.
• Incentives for sponsorship: Include all tax incentives for the participation and collaboration of entrepreneurs and professionals in activities of general interest. These are activities related to the defence of human rights, development cooperation, protection of the environment, promotion of tolerance, etc.
• Depreciation of assets and liabilities arising from the insolvency of debtors: Losses due to credit deterioration resulting from the debtors’ possible insolvencies are deductible when they meet certain conditions, such as having passed six months since maturity, or when the debtor is experiencing an event of seizure, amongst others.
• Health insurance: Health insurance premiums that you pay for your own coverage and that of your spouse and children are considered a deductible expense, by which you pay for the amount that corresponds to your own coverage and that of your spouse and children under the age of twenty-five living with you. The maximum deduction limit is 500 euros for each person reported previously, or 1500 euros for people with disabilities.
• Household supplies: If you work from home, you can deduct the cost of supplies. You can include 30% of the invoices for water, electricity, etc., from the amount that you have declared to the Hacienda as assigned to your activity, via forms 036 or 037.
• Allowance fees: You can deduct expenses of up to 26.67 euros per day in the form of allowances (48 euros abroad) in the absence of an overnight stay and 53.34 euros per day if there is an overnight stay taking place in Spain. If you stay abroad overnight the allowance will be 91.35 euros. These fees must have been incurred in a restaurant and hotel establishment, must be paid electronically and justified by an invoice from outside the municipality of residence.
• Mobile phone: To be able to deduct your mobile phone bill, you must have a phone line suitable for the development of your business. Otherwise, the Hacienda will not allow you to include the invoice as a deductible expense.
• Clothing costs: You can deduct the clothing costs required by your activity (uniforms, shirts, vests, etc.) But they must bear the logo of your company to be covered.
• Fuel and vehicle costs: In the case of personal income tax, the total expenses for autónomos carrying out passenger, cargo, driver training or commercial activities are admissible. These are taxi drivers, carriers, delivery drivers, postal workers, driving schools, commercial agents and representatives. Other self-employed workers will not be able to deduct these expenses from the IRPF and only up to 50% for VAT.

How to deduct them?

Take into account that you can only deduct certain expenses from your income taxes (IRPF). For others, you will only be able to deduct VAT as long as you have the invoice.

For your administrative procedures relating to your self-employed status, do not risk making a mistake, call upon our legal advice service.

Our team of qualified professionals will provide guidance regarding your administrative tasks, so that you can focus exclusively on your professional activity. Contact us today to discuss your project.