A survival guide to deductible expenses for freelancers in Spain — 2024

Xolo
Written by Xolo
on marzo 03, 2023 13 minute read
Xolo Gestoria
verified by Cristina Gómez Torrens
Senior International Accountant
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Today, we're diving deep into the dreaded expenses for freelancers in Spain... cue the dramatic music! 💸💸💸

Yep, expenses are the bane of our existence, constantly draining our wallets and leaving us feeling like we're barely keeping our heads above water. But fear not, my friends, because we're about to talk about the one magical word that can turn this whole situation around: deductibles! 🎉

There are a ton of confusing, but necessary nuances to consider when it comes to deductible expenses, and we're going to go through them all step by step. So grab a cup of coffee, put on your thinking cap, and let's get down to business. 💪

Defining deductible expenses for freelancers

So, what the heck are deductible expenses, you ask? 

Basically, deductible expenses are the ones that the taxman allows us to subtract from our income when calculating our taxes. So instead of paying a buttload of money to the Agencia Tributaria (the tax authorities), we get to keep some of it for ourselves. 🤑

And you know that pesky VAT you hold from your clients? You can also keep a bit of that too. That's right, you can actually save some of your hard-earned cash instead of giving it all to the government. Yay!

Of course, there’s no such thing as a free lunch. The Agencia Tributaria will only let you deduct expenses they consider essential for your work. But don't worry, we'll go into more detail later on. 😉

And here's a little word to the wise. Deductible expenses can be make-or-break for freelancers financially. So trust me, you're gonna want to pay attention to this one!

Why are deductible expenses so important?

One figure can sum up the importance of deductible expenses for freelancers. If you don't deduct all the expenses you're eligible for, you could end up paying a whopping 😱 €4000 😱 more in taxes than you need to. That’s like fancy-new-laptop and trip-to-the-Caribbean kind of cash. 😎

So, yeah, you can see why deductible expenses are so crucial for us freelancers. Without them, many of us would be seriously struggling in our work. But here's the thing: you’ve got to be careful when you're deducting stuff. Try to cheat the taxman by deducting things you shouldn't, and you're gonna get hit with a penalty, interest — all that jazz. And trust us, it's not worth it. 🙅‍♀️

To avoid any headaches, you gotta be crystal clear on what you can and can't deduct. So let’s get started, and try to resist making any “unintended mistakes” along the way, mmmk? 😉

Requirements for freelancers to deduct deductible expenses

So there are a few things you need to know about deductible expenses, and the tax authorities have made it so fun and easy for us to understand... not! Here are the three requirements that they have established, and each one comes with its own twists and turns — just what we needed, more bureaucracy! 🙄

They must be linked to economic activity

First things first, the expenses you're trying to deduct must be linked to the economic activity you're carrying out as a freelancer. This is like rule number one — the golden rule, if you will. So, for instance, if you're a professional photographer and you need to buy a new camera, that's a no-brainer, it's definitely linked to your work. But if you're trying to deduct your Netflix subscription so you can watch The Crown for inspiration, that's not gonna fly. You might have to settle for a free trial. 

They must be properly justified

Okay, so once you've found an expense that's linked to your work, you need to make sure you can properly justify it. This means getting all the receipts, bills, and any other relevant information sorted out. If you’re new to the freelancing game, have you ever noticed how many times you’re offered a credit card payment receipt? Yep, that’s because all the solos are meticulously keeping records.

If you don't have a valid receipt with all the right information, then the tax authorities won't accept the deduction. And that's why freelancers are always begging for them! But seriously, folks, make sure you get all the deets you need: 

  • The tax ID number
  • Your name
  • The payment breakdown (amount, VAT, income tax, the whole shebang)

Keeping track of expenses in accounting records

Here's the easiest one: if you're a freelancer, make sure you keep records of all the expenses you want to deduct. You know, like how you write down all the people who owe you money so you can bug them later. Just us? 

It’s never been easier to keep track of your expenses. Get a cloud storage service like Google Drive and create a folder for every month. Take pictures or download your receipts and upload them all with an easy-to-search name. No, this task won’t fill your bloodstream with dopamine and adrenaline, but when you’re frantically looking for the right receipt, you’ll be so glad you’ve done it.

But seriously, what expenses can you deduct as a freelancer?

Now, for the not-so-easy part. Here are some specific expenses you can deduct from your VAT and income tax payments:

Salaries and other expenses related to your employees

If you’re lucky to have a helper or a full team around the place, you thankfully don’t pay tax on what you pay them. I mean, it would feel a bit wrong anyway, wouldn’t it? If they paid tax on their salary, and you paid tax on paying them their salary. No business would get off the ground!

This section includes your standard monthly wage bill, bonuses, travel expenses, food, and even training courses you provide for your team. 

Social security expenses

Just as you can deduct salaries you pay, you can also deduct the social security payments you make either for yourself as a freelancer, or on behalf of your employees. It's like getting a discount on your taxes, but without the need for an invoice (more on that later).

Outsourced services

If you're a freelancer in Spain and need to hire other companies or freelancers for work, you can deduct that expense too. For example, if you're a web designer and you outsource content writing, that expense can be included in your deductible expenses.

So, keep those receipts and invoices handy, and don't forget to record all your expenses in your accounting records. It might take a little bit of work, but in the end, it'll save you some cash 💰.

Costs of services

If part of your job involves buying and selling stuff, then you're in luck. You can deduct the cost of any merchandise, raw materials, or other goods you buy from third parties, as well as any expenses from transporting those goods to your warehouse. Let’s say, for example, that you're in the business of outdoor furniture, using only the finest cedar wood from Lebanon. You can deduct not just the cost of the wood itself, but also any customs or transportation expenses.

Workspace rental

Whether you're renting an office, a workshop, or a cubicle in a coworking space, you can deduct the cost of rent from your taxable amount. And that's not all — you can also take off the cost of utilities like electricity, internet, and gas.

Maintenance works

Maintenance and repairs cover your premises and everything in it. Need a computer fixing? Get that deducted. Water pipe burst? You don’t want to be paying excessively to get it repaired. Just keep in mind that if you're making any major improvements or additions to your property, those might not be deductible as expenses — they might be considered investments instead.

Taxes and deductible fees

Great news, folks! You can deduct taxes like the real estate tax (IBI) and business tax (IAE) from your IRPF calculation.

Financial expenses

Financial expenses are deductible too, but what do we mean by that? Well, if you borrowed some capital from third parties, you can deduct the financial expenses, such as interest on loans, surcharges on debt payments, and other interest-related costs — quite a wide-ranging list.

Remote worker housing expenses

Since a lot of us are working from home, Hacienda (another word for the Agencia Tributaria — the tax man 👀) lets us deduct the percentage of our home dedicated to our freelance work from our tax returns. Typically, that's one room, but it depends on your situation.

Household supplies for remote workers

You can also deduct 30% of your water, electricity, internet, and other household supplies if you're working from home. So chase up those bills and get them saved in the cloud!

Special deductions for freelancers in Spain

Clowns to the left of me, jokers to the right, here we are. Stuck in the middle with a few deductible expenses that are solely for us freelancers! 

Vehicles and related expenses

Regarding personal income tax, only freelancers who use their vehicle as an essential tool for their work — such as driving schools, delivery drivers, and truck drivers — and who can demonstrate that it is used exclusively for professional purposes, can fully deduct vehicle expenses 🚙.

In the case of VAT, all freelancers can deduct 50% of their vehicle expenses, as long as they can prove it with paperwork.

Cell phone costs

Cell phones, mobiles, smartphones, whatever, are similar to vehicle expenses, though it’s a little stricter. You can only deduct telephone expenses if you have two separate lines, one for personal use and one for professional use.

Traveling and the famous “business dinners”

In the heady times before the 2009 crisis, you could expense the city’s fanciest dinners. You’ve seen Wolf of Wall Street, right? But that generation had a bit too much fun and it’s more expensive to live the high life these days. 

Since the January 2018 tax reform, freelancers can deduct expenses between €26.67 per day (€48 if abroad) and if you’re staying somewhere overnight — €53.34 (€91.35 abroad). Hotel and transportation expenses are also included in this deal.

Your wardrobe

Yeah, you could say that you need a snazzy suit for work, so it’s a deductible expense. But the Agencia Tributaria would tell you where to go. And deep down, you’d know you’re pushing your luck. 

However, if you’re in the fashion industry, or in a theater group, you can confidently claim that your wardrobe is part of your business activity.

What is not tax deductible for freelancers?

The easy answer is “everything else”. But let’s give a few examples.

  • Your grocery bill. Yes, you might need pistachios or a pack of Red Bulls to keep you going, but they won’t fly as deductible expenses.
  • After-work drinks may have the word “work” in them but… no.
  • Subscriptions to Netflix, or Audible for those environmentally friendly readers. Even if you use them for research.

An example of expenses for freelancers

Sam is a video editor for music festivals. After a busy summer of work, they earned a yearly salary of €24,600. Nice one, Sam. But then came the time for the yearly tax returns.

Sam has always professed to be more creatively minded, and “not a numbers person”. Whenever the time came to actually find out what deductible expenses are and how they work, Sam got a familiar urge to open a new tab and watch whatever YouTube was offering that day. Procrastination in action. Sound familiar?

But recently, Sam read this article 😉 and felt totally prepared to reap the benefits of expenses as a freelancer. After getting all their yearly receipts together — that new camera for Christmas, payments to the sound technician, and those endless journeys all around the country — they filed their expenses with the Agencia Tributaria.

And just like that, Sam has dropped their taxable income from €24,600 to €20,000. In real terms, that’s over €1000 saved in personal income tax. But Sam will also get the 21% VAT back from those purchases throughout the year. Jackpot.

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How to properly deduct each expense as a freelancer

Deducting expenses is not always straightforward, and there are specific requirements to qualify for deductions. In this section, we will outline the documentation you need to deduct classic freelance expenses. 

 🍽 Meals with clients or providers

A receipt from a casual dinner out with your cousin Billy is out of the question. To deduct expenses from meals with clients, it has to be a work-related expense. 

To justify this expense, provide a simplified receipt with your information, along with a bank receipt proving payment. Some places will give you a full invoice with all the details, but it’s not common. You should also include supporting documents such as emails or notes discussing the meeting and why you’re having it.

⛽️ Vehicle and fuel expenses

Vehicle and fuel expenses are closely monitored and require special attention. To qualify for deductions, it must be in relation to a vehicle that is exclusively used for work. You can prove this by showing a list of clients and their locations, emails with agreed visits, invoices issued, the vehicle's technical data sheet, and other documentation that proves that the vehicle is used solely for business purposes. It helps if your businessmobile isn’t top of the range, and you’ll also need to prove you have a second vehicle for private use.

In addition, this total deduction of both personal income tax and VAT is only applicable to the following jobs:

  • Transporting goods or passengers
  • Training drivers or pilots
  • Traveling sales
  • Surveillance services
  • Test vehicles used by manufacturers

If the vehicle is not exclusively used for business purposes, then only 50% of the VAT can be deducted, with no savings in personal income tax. It’s better than nothing. You’ll have to show a full receipt in your name for the purchase and gas receipts should be from a working day.

If your job is VAT-exempt, you can’t qualify for these expenses. Sorry!

🖥️Hardware and depreciable assets

This next group of expenses includes all those depreciable assets costing a taxable base of more than €300, and that will last more than one year. Think computers, office equipment, and machinery. 

When it comes to deducting these expenses, the VAT is deducted in the same quarter as the purchase was made. Personal income tax is recouped according to the tables published by the Hacienda every year. 

To justify these expenses, you will need to provide an invoice that includes all necessary data, such as the date, the amount, the supplier's details, and how the expenses are linked to your work. 

For example, a consultant needs a new iPhone:

The iPhone qualifies as a business cost, but the “Bumpers Black” cover doesn’t exceed €300, so it gets taken off your taxable income.

It's also worth noting that if you're buying something considered an investment (more than €300) through Amazon, you'll need to do it through the "Amazon MyBusiness" section to get the correct invoice. 

🛋 Furniture and other fixed assets

The procedure for deducting furniture and other fixed assets is similar to that of the previous point: any asset that can be considered an investment (over €300) is deductible from your taxable income according to the Hacienda’s tables.

🩺Health insurance, social security payments, and membership in professional associations

In the case of health insurance, social security contributions, or membership payments to professional associations, since we can’t provide an invoice, we have to use a bank statement with details of the transaction.

Make sure your health insurance policy is in your name.

These deductions are capped at €500 and an additional €1500 for three family members (spouses or children under 25 living at home with incomes under the minimum wage. However, for people with disabilities, the limit can rise to €1500.

💡Utilities and bills

You can save on electricity, gas, water, phone, and internet, but not all of them are fully deductible. As a freelancer, you can only deduct 30% of the percentage of your home that you have specified in form 036 when you register to be a freelancer. These expenses are only deductible in personal income tax, not in VAT.

That’s a bit complex, so let’s take an example:

My internet bill is €20.00 + VAT = €24.20.
I told the Agencia Tributaria in form 036 that I use 10% of my home for work.
(€24.20 x 10% x 30%) = €0.73 deductible from my income tax.

These bills must always be in your name, and you have to provide the rental contract or mortgage agreement for the property you’re working in.

📞 Telephone bills

Phone and internet bills that include a TV package aren’t deductible. But if you have a mobile line exclusively for business and can get a bill that isolates this cost, then it’s 100% deductible. Usually, this means having a breakdown of your bill, including all your phone lines. It should be easy to spot which parts are deductible as utilities, which aren’t deductible, and which you can get a 100% deduction on.

🏠 Renting a home

The deduction of rental expenses is a complex matter. Sometimes you can, sometimes you can’t, depending on the terms of your rental contract. 

At Xolo, we carefully review each case individually. We look over your rental contract to see if there are any clauses that make you eligible for deductions. 

If you are eligible, you’ve got to get those details down in form 036, just like your utilities, and you’ll get the same 30% of the percentage of your house you use for work.

💰 Professional expenses

Professional expenses cover activity expenses that do not fall under any specific category or group. These may include management fees, purchase of materials, and other similar expenses. For these expenses, there are two important details to remember:

  • If you receive an invoice for services from other professionals with an income tax retention, you have to submit and pay the retained amount quarterly through form 111, then submit it in the form 190 summary.
  • For invoices on a rented workplace, you submit and pay the retained amount every quarter using form 115, and annually, through form 180.

🚅 Transportation

You always need to back up work-related travel expenses with a document. But the type of transportation will determine the documents you need:

  • Flights: the ticket alone isn’t valid without an invoice from the airline, except for Ryanair, which does not issue invoices.
  • Long-distance trains: you always need an invoice — the ticket isn’t deductible.
  • Travel pass: not deductible because you can’t prove you only use it for work 😢.
  • Public transportation: with no full invoice (which is hard to get), you can only deduct it from your income tax return.
  • Taxis and ridesharing companies: you need a full invoice to deduct it for both VAT and personal income tax.
  • Parking and tolls: deductible for income tax and VAT — provided that you have a full invoice. 
  • Car hire:

 

Cheat sheet for transport-based tax deductions

Flights (except Ryanair)

Company invoice with all data included

Ryanair flights

Flight ticket and bank statement proving purchase

Trains

Full invoice

Travel pass

Not deductible

Public transport

Only deductible for personal income tax unless a full invoice is obtained (usually complicated)

Taxis

A full invoice deducts VAT and personal income tax. No full invoice, no VAT deduction, but you still get the PIT deduction.

Ridesharing (Uber, Cabify, etc)

The apps normally provide invoices to deduct both VAT and personal income tax

Parking and tolls

Parking lots, paid street parking, and tolls can only be deducted from your income tax unless a full invoice is available, then you can claim back the VAT too.

 

🍜 Meals

Like we said before, there are daily limits on your eating out expenses. For purchases in Spain, the limit is €26.67, or €53.34 if you’re staying overnight. If you’re abroad, the limit is €48.08, or €91.35 with an overnight stay. But, there are other conditions to qualify for these deductibles, such as:

  • The expenses are only for restaurants or hotels. Supermarket receipts and home delivery services aren’t accepted.
  • You need to get an invoice with all of your data.
  • You can only pay electronically (card, to you and me), and you need to keep the card receipt.
  • You can only deduct meals eaten during work hours and while you’re at work.
  • To be deductible for both VAT and income tax, you need proof that you were working, such as an invoice you send to the customer.

Summary of deductible expenses for freelancers in Spain — 2023

Expense type

VAT

Document for VAT deduction

Personal income tax

Meals with clients

Full invoice, justification of the expense with income

Gas and vehicle expenses

Full invoices

Hardware and depreciable assets

Full invoices

Health insurance

Bank statement

Utilities

Full invoices

Professional expenses

Full invoices

Social security contributions and professional memberships

Bank statement

Transportation

Full invoice, justification of the expense with income

Meals

Full invoice, justification of the expense with income

 

🙋 Any Questions?

Still not sure if your receipt qualifies as a deductible? Xolo users can upload it to the platform and leave us a comment. Our team will review it and let you know if it can be deducted or not!

Take the hassle out of tax season with Xolo

At this point, you have a couple of options: 

  1. Memorize all the information we've provided and file your tax return on your own, hoping everything goes smoothly. 
  2. Gather your invoices for all of your deductible expenses as a freelancer, upload them to Xolo, and let our team of experts handle your VAT and income tax returns like the pros we are. 

Now I know you’re ambitious, but let’s get serious here. Spending hours of your valuable time and brain power on confusing tax returns? Really? You could be at the beach instead (sorry, Madrid). 

Sign up to Xolo and let us help take the hassle out of tax season.

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