31/01/2018 - News Tax

Deductible Expenses for the Self-employed in 2018

Autor: Elena Bárnaba Sanz

Act 6/2017, of 24 October, on Urgent Reforms of Self-employed Work, published in the Official Spanish Gazette (BOE) of 25 October, introduced modifications for self-employed workers in tax matters.

It should be noted that, although the changes refer only to Personal Income Tax, it is understood that the reform will also have consequences on VAT, given the connection between the two taxes in terms of this type of expenditure.

The specific measures that have been taken are, on one hand, to provide an objective criterion for deductibility of expenses for electricity, gas, water and telecommunications supplies when the employer or professional carries out his activity in his or her own habitual residence and, on the other hand, to establish the possibility of deducting certain amounts for maintenance.

Household utility expenses incurred by taxpayers whose habitual residence is partially used for their economic activity

The reform addresses the (controversial) cases of deduction of expenses related to supplies in main residences which are partially used in economic activity. Ad exemplum, the General Directorate of Taxes had been considering that the deduction for supply costs was only possible if it could be demonstrated that consumption was exclusively linked to the economic activity.

As from 1 January 2018, an objective rule for deductibility of supply costs applies when the activity takes place in a part of the employer’s or professional’s habitual residence: 30% will be applied to the part of expenditure corresponding to the square metres assigned to the activity in relation to the total metres of the residence (those data must appear in the tax register of business persons, professionals and withholders form).

The fact is, therefore, that the amount that the taxpayer will be able to deduct will often be a symbolic amount.

Maintenance expenses of the holder of the economic activity:

The expenses of locomotion, maintenance and stay are also a point of controversy between professionals and businessmen and the Administration.

The sometimes difficult justification of the link between certain expenses of this nature and the activity carried out by the self-employed has led to the establishment of deductibility requirements and a maximum regulatory cap on the amount of deductible expenses.

The requirements to which the deduction is subject are as follows:

-The expenses must be incurred in restaurants and hotels.

-They must be paid using electronic means of payment (card, mobile phone, etc.).

As for the maximum amount of deductible expenditure: it is set at 26.67 euros per day if the expenditure is incurred in Spain and 48.08 euros per day if it is incurred abroad. If the journey involves an overnight stay, the deductible amount will be 53.34 euros per day if the journey takes place in Spain and 91.35 euros per day if the journey takes place abroad.

Logically, the above sums are maximum amounts, so if the amount of expenditure is lower, the taxpayer will only be able to deduct the amount he actually paid, the reality of which he can prove.