In this article we explain in detail how the self-employed can deduce the autonomous deductible expenses in the Income Tax (IRPF).
The information summarized below comes from legal precepts, court interpretations and knowledge derived from experience. The objective of this article is to offer a summary of the regulations and the criteria that are applied, in order to reduce the possibility of conflict with the Treasury.
For some of the usual expenses of the professional activity (autonomous deductible expenses), the regulations give us a very concrete idea of how we should act. Despite this, in many cases there is no simple, clear or concrete rule.
According to the criteria of the Directorate-General of Taxes, the fulfillment of the requirements that determine the deductibility of the expense "is not a matter of law, but in fact, since the characteristics of the activity carried out must be verified (...) being competent to verify the Management and Inspection bodies of the Tax Administration ".
Recall that: The burden of proof lies with the taxpayer. If the Tax Agency does not receive accreditation of compliance with the requirements, it can reject the deductibility of the expense and the VAT paid.
Three essential requirements for autonomous deductible expenses
- We must have an invoice
The first requirement we must meet, in order for an expense to be deductible, is to have the invoice that accredits it, in our name.
This is a necessary requirement (although not sufficient) both to deduct the expense in Income Tax (IRPF) and for the deduction of VAT, if applicable.
Remember that the Treasury will not accept tickets, or proof of payment by credit card, or delivery notes or similar. None of them are a valid document to prove neither the expense nor the VAT deductible.
Notarial deeds can be accepted as an invoice substitute document.
All these expense invoices must be recorded or conveniently recorded in the Invoice Book received. Otherwise, the expense will not be deductible. Neither would its supported VAT.
We must also know that we can always demand that we be issued a full invoice in any business, even if they are from those that usually sell through tickets or simplified invoices. If we ask for an invoice for our purchase, they have the obligation to do it to us.
- Relationship between spending and professional activity
The second essential requirement, in addition to having the invoice in our name, is to be able to prove the relationship between the expense and the professional activity that has motivated it.
That is, having an invoice for an expense does not allow us to deduct it directly. If we can not demonstrate that the expense has a clear relation with the economic activity that we develop and with the income derived from it, said expense will not be deductible for the calculation of the Income Tax. Neither for VAT purposes.
- Elements related to professional activity
Expenses derived from elements related to the activity (vehicles, communications, real estate, etc.) can be deductible provided that the effect of said elements is exclusive - we repeat: exclusive affectation - to the professional activity.
The partial affectation of indivisible elements (vehicles, telephones, etc.) is not admitted.
And remember that the burden of proof falls on the taxpayer.
Ten concrete cases of autonomous deductible expenses
- Autonomous deductible expense settlements for travel or similar
The Income Tax Law (IRPF) establishes that they are autonomous deductible expenses the maintenance of the self-employed, incurred in the development of the economic activity, provided that they take place in restaurants and catering establishments and are paid using any electronic means of payment, with the quantitative limits established by regulation for diets and allowances for normal workers' support expenses.
Make a habit of filing the invoices corresponding to a posting together with a "settlement sheet" explaining the displacement, in which the following data are reflected:
- Worker who has made the displacement
- Date, reason for displacement and destination.
- Client, supplier or people visited, who have a direct relationship with their activity.
As we have already mentioned, the tickets, the proof of payment by credit card or any other document that is not an invoice, are not accepted. If an inspector of the Tax Agency admits a "reasonable" amount (= small, very small) of expenses credited by tickets, it will be because you have made an important effort to prove that those small taxi expenses, restaurant tickets, tolls, etc. they have been produced by a displacement or visit derived from economic activity and may never have been private. In any case, remember that if you do not have an invoice, the inspector can always reject the expense or VAT deductible.
- Fuel, tolls and restaurants
Make an effort to obtain invoices from the companies that sell fuel for cars, from the concessionaires that charge tolls, from the usual restaurants, etc. The more complete invoices you have and the less proportion of "tickets and similar", the more likely you will be to accept the latter. If you have many tickets you will hardly be admitted.
The autonomous deductible expenses Regarding the car or the motorcycle, they are especially conflicting, since they are vehicles that can be used both for professional activity and for personal life.
There will be no deductible expense of Income Tax (IRPF), unless we can demonstrate that the vehicle in question has an exclusive use for the professional activity: it is always kept in the garage of the professional activity, other vehicles are available for the particular purposes, the vehicle of the activity is labeled with the business logo of the business, etc.
Vehicles with special characteristics for the professional activity, as well as their associated expenses, will be deductible; specifically those dedicated to the transport of goods or travelers, driving instruction, commercial trips or those offered for rent.
According to the VAT regulations, if the car is used for private and professional purposes, only the 50% of the VAT paid on the purchase of the vehicle and the expenses related to it will be deductible. In order to deduct a higher percentage, the professional must certify conclusively that the vehicle is used exclusively for the professional activity.
- Telephone and communications
This is one of the expenses for which it is more difficult to demonstrate its exclusive effect on the professional activity, since the telephone is always capable of being used any day of the week for personal calls.
Having two independent lines, as well as two telephone devices, can help. Although we should always be able to demonstrate that calls made from the professional phone have been made for work reasons.
- Office shared with housing
With regard to the expenses related to ownership of the property used both as housing and office, we must know that it is considered a good divisible. Thus, one part of the activity can be affected, depending on the percentage of square meters used in it.
In this way, the expenses derived from the property, such as the Tax on Real Property (IBI), will be deductible in the proportion determined by the square meters dedicated to the professional activity. Remember that it is we who will have to demonstrate this proportion.
Be prudent with the costs of repairs and others that, by their characteristics, are imputable to parts of the property that have little to do with the professional activity (bedroom, kitchen, etc.) since they would not be deductible.
New: With regard to the expenses for supplies (water, gas, electricity, telephony and Internet) a new law determines that, starting with the 1 of January of 2018, only a part of them will be deductible in the Income Tax.
The deductible percentage, with respect to said expenses, will be the result of applying the 30% to the proportion existing between the square meters of the dwelling intended for the activity with respect to its total area, unless a higher or lower percentage is proved.
To do this, we will first calculate the proportion of the square meters allocated to the activity, with respect to the total of the house. And then, on that percentage we will apply the 30%, thus obtaining the definitive percentage of deductible expense for the supplies.
In Income Tax (IRPF), health insurance premiums are deductible, both in the part corresponding to the coverage of the professional and in that of his spouse and children under twenty-five years of age living with him. The maximum deduction limit is 500 € for each of the persons indicated above (or 1.500 € for each with a disability).
When it comes to gifts or attention to customers (meals in restaurants, for example), get used to note on the invoice the person or entity receiving them. In this way you can prove that the recipients were customers or people clearly related to the activity and income. The amount must be "logical".
Only one that has characteristics that make it susceptible to exclusive use for the activity will be deductible.
9 Training courses
They will be deductible provided there is a direct and clear relationship with the professional activity.
10 Computer and office material
The office material, the purchase of books and the autonomous deductible expenses related to computer equipment will be deductible, provided that the requirements commented at the beginning of this article are met: invoice in the name of the professional registered in the Received Invoices Book, demonstrable relationship with the professional activity and exclusive affectation to it.
The information contained in this article includes the regulations applicable in general, to the most generic activities and operations. If your activity has specific characteristics and you think other regulations may apply, we advise you to consult with your advisor.
Note: The deliberate lack of tilde in the word "autonomous" is to facilitate its location in the search engines.
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