An expense is deductible when it is connected to the activity, supported by a proper invoice and recorded in your books. Most disputes are about the first of those three.
Spanish law does not publish a list of permitted expenses. It sets conditions: the cost must relate to earning the income, it must be documented, normally by a full invoice in your name and tax number, and it must be entered in your register of expenses. A receipt from a till, without your details, is usually not enough.
If you work from home and have declared it to the tax agency, the costs of the home itself (rent or mortgage interest, local property tax, community fees) are deductible in proportion to the area used for work. Utilities follow a specific rule: 30 % of the proportion of the home used for the activity. With a workspace of 10 % of the home, 3 % of the electricity, water, gas and internet bills is deductible. It is a small figure, by design.
Freelancers under the simplified direct assessment method can also deduct a flat percentage of their net profit for expenses that are hard to justify, up to an annual cap. It needs no invoices.
The items most often refused in a review: vehicles used for both work and private life, restaurant meals without a clear business reason, clothing that is not specific work wear, phones and tablets with no evidence of business use, and anything invoiced to another person. Foreign suppliers are not a problem in themselves, provided there is an invoice identifying you.
An item bought for long-term use is not an expense of the month in which it is paid. Its cost is spread over its useful life using official rates. A computer is typically written off over four to five years, furniture over ten, a vehicle over about six. Small businesses can use accelerated rates, and low-value items can be deducted in the year within an annual cap.
Example: a €2,000 laptop bought in July. At 25 % a year, the deduction for the first year is half a year's worth, €250; then €500 a year until the cost is recovered. The VAT on the purchase, by contrast, is deducted in full in the quarter of purchase, if the laptop is for the business.
A cost invoiced from abroad is deductible on the same conditions as a Spanish one. It is recorded in euros at the rate on the invoice date. If it is a service from a business in another country, the reverse charge applies for VAT. If the supplier is in another EU country, your EU VAT number should appear on its invoice, which is one more reason to hold one.
Costs paid in your home country for the Spanish activity, such as a professional subscription or a licence, are deductible too, provided they are in your name and relate to the work.
We keep the books and file the returns for foreigners working in Spain, in English, for a fixed monthly fee.