DEDUCTIBLE EXPENSES FOR INDIVIDUALS, IN SIMPLIFIED DIRECT ESTIMATE
- The criteria that the Treasury establishes to consider that an economic outlay can be considered as a deductible expense are
- They must be expenses linked to the economic activity carried out by the self-employed person, or as the Treasury says, that are “affected” by it”.
- They must be properly justified by the corresponding invoices. Sometimes they may be worth receipts.
- They must be recorded by the self-employed person in their corresponding expense and investment books.
HOUSING
If the professional activity is carried out in a dwelling, the tax authorities must be notified, indicating the percentage of the dwelling dedicated to the activity. Normally it is one room or maximum two, so it will be affected between 15% and 50% at most if you do not want to have problems of proof.
If you are renting, the problem is that you should have two different invoices, since the rent for the professional part must include VAT. And this is done by very few people, largely because of the inconvenience to the owner.
Domestic supplies From 01/01/2018 by Law 6/2017 of 24 October will allow the self-employed who have notified the Treasury, can deduct 30% of the costs of water supplies, gas, electricity, telephone and internet.
VEHICLE
Expenses relating to the vehicle, such as depreciation and other expenses connected with its use, may be deducted only if evidence of exclusive use of the vehicle is adduced by any legally valid means of proof. The vehicle will be considered to have exclusive use only in the cases established in article 22.2 of the IRPF regulations or when some of the exceptions of article 22.4 of the RIRPF are applied
Article 22RIRPF – Only those used only for the economic activity will be considered to have exclusive use, and they must appear in the accounting of the economic activity of the contributor.
DEDUCTIBLE EXPENSES FOR INDIVIDUALS, IN SIMPLIFIED DIRECT ESTIMATE
Art 22.4 Personal Income Tax – may not be applied to passenger cars, mopeds, boats except :
- Mixed vehicles intended for the transport of goods
- Those intended for the carriage of passengers for reward .
- Those intended for educational services
- Those destined to the displacements of Commercial Agents
The rest of the self-employed will not be able to deduct these expenses for personal income tax and only up to 50% in the case of VAT. Acquiring the car for hire is an increasingly common option, although it is subject to the same tax limitations mentioned above with regard to the deduction of the fees and the VAT paid on them.
Therefore, in cases where the requirements are not met, the following cannot be deducted: petrol, vehicle insurance, MOT, repairs, motorways and depreciation.
CORRELATION OF INCOME AND EXPENDITURE
The deductibility of expenses is subject to the principle of correlation with income, so that expenses which are proved to have been incurred in the course of the activity and which are necessary for obtaining the income are deductible, while when there is no connection or it cannot be proved sufficiently, they are not deductible for economic activity,
In addition, the deductibility of the above-mentioned expenses is conditioned by the fact that they are properly justified by means of the original invoice or equivalent document and recorded in the record books that taxpayers are obliged to keep in the Simplified Direct Estimate.
Therefore, simplified invoices and tickets are not sufficient proof of an expense since they are not nominal titles. ( requirements RD 1619/2012 art 1 and following invoicing obligations )
Restaurant expenses corresponding to invitations from the taxpayer to other persons in the field of professional activity, in addition to being difficult to prove that they do not correspond to the private sphere, are considered convenient and not necessary and are therefore not deductible (TEAC 7/06/2002)
From 01/01/2018 according to law 6/2017 the self-employed may deduct up to 26.67 euros per day for expenses in allowances and maintenance for work purposes (48.08 euros if it is abroad), provided that payment is made by telematic means so that it can be accredited by invoice
EXPENSES OF DIFFICULT JUSTIFICATION
Article 30 of the Personal Income Tax Regulation Royal Decree 439/2007 applies a 5% tax on expenses that are difficult to justify, which is applied when preparing the annual income tax return.
Article 30.2 of the Personal Income Tax Regulations provides that “all deductible provisions and expenses that are difficult to substantiate shall be quantified by applying the percentage of 5% on net income, excluding this concept, without the resulting amount exceeding 2,000 euros per year”.
The 2,000 euro limit will be applied individually by each taxpayer to the total net income from its economic activities. Therefore, if the taxpayer has several economic activities, the limit will apply taking into account the income from all of them.
