Taxes
January 13, 2022

Freelancer Personal Income Tax Deductions in Spain

Work hard, pay smart 101

There are typically a lot of doubts when it comes to work-related expenses. That's why we've split chunks of information for you in this article. It's time to learn, digest, and apply this knowledge to make the most of your freelance income this 2022! 

 

So… what is Personal Income Tax again? 

 

Your Personal Income Tax (IRPF or Impuesto Sobre la Renta de las Personas Físicas) is a tax that both the employed and self-employed must pay on what they earn. These are the different occasions that the Personal Income Tax will be present in your freelance life:  

  • When you invoice a client 
  • When you declare it every quarter. 
  • When it's time to calculate it in your Annual Tax Report (Declaración de Renta Anual)

To file your Personal Income Tax, you'll have to turn in Tax Form 130 (Modelo 100) or Tax Form 131 (Modelo 131) every quarter. Later on, these quarterly reports will help you file your annual tax return (Declaración de Renta).

 

Want to learn more about Personal income Tax? Read What are the costs of being a freelancer in Spain?

 

Personal Income Deductions from work-related expenses: the basics

 

The entity that decides what types of expenses can be deducted from your personal income tax (IRPF) is the Spanish Treasury (la Agencia Tributaria or Hacienda). For your expenses to qualify as "tax-deductible," you'll have to meet the following requirements: 

  • They must be work or work-related expenses. (sorry that after office Vermut does not count).
  • You'll need hard-proof evidence. You'll have to justify these expenses with their corresponding invoices or receipts. All of them must include your tax information (name or account number). 
  • They must be accounted for every quarter. Keep track of these in your expense record book.   
Tips to keep track of your deductible expenses:
  • Keep a digital or physical folder to save all your invoices and attach an explanation with their expense details. This will come in handy as proof if the Treasury ever asks to inspect your profitability. 
  • Don't be shy. Always make sure your invoices and receipts have your tax information. Make it a 2022 habit!
  • Use apps to keep track and consolidate all your work-related deductible expenses in one place. We've got good news on this tip, you'll be able to see bank, Wise, and Paypal accounts with the Corgee app!

Expenses you can deduct from your Personal Income Tax (IRPF) 

 

Work-related goods: office supplies, merchandise, auxiliary material, any technology used for your job (cellphone, computer, software).

 

Third-party professional services: This includes professional services, such as expenses on tax and accounting services. Yes, you'll be able to deduce your payments when using the Corgee app!

 

Salaries and contracts: If you can legally hire, this would include the wages of your employees, allowances for work travel expenses, and compensation benefits. This also applies to any type of training for your employees, compensation benefits, insurance costs, and employee gifts and benefits. 

 

Social Security Contributions: Your monthly payments to the Regime for Self Employed Workers (RETA). In other words, your monthly Social Security fee.  

 

Rent Leases and royalties: if you're paying rent for office space or you have a physical shop. 

 

Office utility expenses: If you have a shop or office that you've declared you use exclusively for work, you can deduce costs on utilities such as electricity, water, and your telephone bill. 

 

Tax-deductible taxes: real estate tax (IBI), economic activities tax (IAE), and other non-state taxes and surcharges and state taxes, surcharges, and contributions. 

 

Other expenses: work-related book expenses, magazine subscriptions, event planning (for workshops, congresses, and conferences), and monthly fees to corporate entities.

 

Deductible expenses that almost look like personal expenses: 

 

So how can we tell if your expense is professional or personal? It's a tough one. As we said, the Spanish Treasury gets the last say on this one. Here's a list of some expenses you might not have claimed the previous year. The downside they all come with their set of strict requirements. These are: 

 

Applicable work-related food expenses. This one is tricky! Treasury is stringent and keeps a close eye on these deductions. If you're eating away from home for business and not on a work-related trip, you can deduce 26,67-euro in Spain and 48 euros if you are abroad, per day. If you are on a work trip and not returning home that night, you can deduce 53,34 euros in Spain and 91,35 abroad per day. 

 

You'll also have to meet the following requirements: 

  • These have to be strictly work-related food expenses 
  • Only applies to restaurants or hotels. 
  • You'll have to pay with card or electronic means with proof of invoice. 

Phone bill: This only applies if you have a work-related phone number. 

 

Car expenses and transportation. If transportation is a fundamental part of your work, you might be able to deduct vehicle expenses in your Personal Income Tax. These expenses can include car maintenance, insurance, and gas. But watch out! This only applies if you work transporting goods or passengers, food delivery services if you're a teacher at a driving school or a commercial agent that uses their car regularly. 

 

Health insurance costs: you can reduce your tax base to € 4,500, depending on the investment made on private health insurance, which is considered a deductible expense for the self-employed.

 

A percentage of your home utility services: If your "office" is in your house, then you can get a 30% deduction on utility expenses such as water, electricity, or your phone bill. Remember, this deduction only applies to your "office space." In other words, we're not saying that you can deduce all of your home utility expenses. Here come the requirements:

  • First, you'll have to notify the authorities that you are working at your home address through Forms 037 or 036. 
  • This deduction only applies to your proportionate "office space." For example, if you're only using one room as an office, this could mean that only around 20% of your home utility expenses are "work-related." 
  • The Spanish Treasury will only consider the weekdays and work hours you'll use these services.
  • If you're renting, this might be tough since you'll have to have a different invoice for your "office space" expenses and include your VAT. 
  • As proof, the authorities could ask you for a separate counter to differentiate the power or water use in the professional versus the part of your house you use for personal reasons.  

Some expenses on work trips: If you took a weekday trip to meet a client or to host a seminar, you might be able to deduce the costs of paying for the train, plane, and cab.

 

Job uniform or protective apparel: If your job requires protection garments, then you'll be able to deduce these expenses too. 

 

Expenses on financing services: This can include interest rates on loans and credits, discounted bills of exchange, surcharges for deferment of debt payments, interest for the late amount of payments to the Treasury. Always applicable to pay for professionally related expenses, of course. 

 

Still curious about how to get the best of your income this 2022? Read our newsletter for some special money saving-hacks- and let it rain! Well, not so much! But why not take advantage of these deductions, save up, and finally treat your freelance self to something nice! 😉.


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