In order for expenses to be tax-deductible as business expenses in Spain, they must generally be supported by a corresponding invoice (Factura). Unlike in other countries, such as Germany, Spain does not provide for automatically applicable flat-rate deductions, and the possibility of substantiating expenses by means of receipts (Recibos) is very limited.
Although there are certain exceptions depending on the type of tax involved (mainly personal income tax and VAT), the following three requirements must generally be met for an expense to be tax-deductible:
- The expense must be directly related to the economic activity (afecto).
- The expense must be duly recorded in the accounting records.
- The expense must be supported by an invoice (Factura).
This last requirement in particular results in a comparatively high administrative burden in practice, as invoices should include at least your name, tax identification number, address and the applicable VAT. If only “tickets” or “facturas simplificadas” (simplified invoices) are provided, there is a risk that the Spanish Tax Agency will not accept them without additional documentation or justification. To avoid subsequent problems, it is therefore advisable to request a complete invoice whenever possible, subject to the few exceptions explained in the following sections.
1. Services and Consumable Goods
Advertising, insurance, bank account fees, transport, assets that may be freely depreciated (up to €300), etc.
2. Services Provided by Professionals and Other Self-Employed Persons:
Services provided by professionals (lawyers, tax advisors, economists, estate agents, etc.) are treated separately from other services for accounting purposes in Spain, as the so-called “withholdings” (Retenciones) must be applied to the fees charged by these professionals. The invoices generally show a withholding of 15% or 7%, which must subsequently be paid to the Spanish Tax Agency on a quarterly basis on behalf of the professional.
3. Rental Expenses
Rental expenses are fully deductible where the rented property is commercial premises or an office required for the business activity. In these cases, the rent is subject to VAT, and the corresponding VAT should therefore be stated in the rental agreement. If the landlord is also a private individual, the corresponding withholding tax must generally be applied and paid to the Spanish Tax Agency on a quarterly basis (Modelo 115). This should also be stated in the rental agreement and reflected in the payment records.
4. Electricity, Water, Internet and Telephone
The deductibility of these business expenses depends on whether you carry out your activity from your private residence or from separate commercial premises or an office.
a) Separate Commercial Premises or Office.
If the activity is carried out from separate commercial premises or an office (whether rented or owned), these expenses are generally fully deductible. If the office is physically separate but located in the immediate vicinity of your home, separate meters or contracts should generally be maintained (one for private use and one for business use).
b) Office or Business Premises within Your Home.
If the activity is carried out from home, the expenses may be deducted proportionally according to the area used for business purposes. If you rent your home, two separate rental agreements may be required for deductibility purposes (one subject to VAT and one without VAT). If you own the property and have an office in your home, or if you rent the property and have two separate rental agreements, generally 30% of the proportion of the property used as an office may be deducted. For example, if your office represents 40% of your home, you may deduct 12% (40% x 30%) of the expenses referred to above.
Both acquisition costs and monthly expenses may generally also be deductible where the activity is carried out from home or without a fixed workplace, although the limitations referred to in the previous section also apply.
5. Mobile Phone
In order for the costs to be fully deductible, it must be demonstrated that the mobile phone is used exclusively for business purposes. Such exclusive business use can, for example, be demonstrated by having a second mobile phone number for private use.
6. Depreciation and Financing Costs
Where assets required for the business activity are purchased for more than €300 (€3,000 for VAT purposes), they must generally be recorded as investment assets and depreciated quarterly over several years. The cost therefore cannot be allocated entirely to the year of acquisition and only reduces the profit proportionally through depreciation. Interest and bank charges may generally be deducted as financing costs. Examples include a mortgage on an office or a vehicle leasing agreement.
7. Daily Meal Expenses
Since 2018, up to €26.67 per working day may be deducted for the self-employed person’s own meal expenses, provided that the meals are consumed in restaurants or other catering establishments, the corresponding supporting document is available and payment is made electronically, for example by debit or credit card. Although the Spanish Tax Agency has not adopted an entirely unequivocal position in this respect, it appears to be consistent with the purpose of the legislation that, in such cases, a receipt (ticket) together with proof of payment may be sufficient. To be on the safe side, however, it is advisable to request an invoice in each case.
8. Travel and Meal Expenses
Travel by public transport can generally be deducted in full, although the Spanish Tax Agency may require evidence of the business necessity of the trip in the event of a tax inspection.
If you travel in your own vehicle, except in the case of activities involving the transport of goods or passengers, neither the vehicle’s running costs nor fuel costs can generally be deducted for personal income tax purposes. If these costs are deducted, both the business use of the vehicle and the business necessity of the journey must be demonstrated in detail. For VAT purposes, 50% of the costs may generally be deducted without further evidence of the extent of business use, provided that the corresponding invoice is available.
Hotel and meal expenses may generally be deducted if supported by an invoice, although meal expenses must remain within the following maximum limits:
Spain: €26.67 without an overnight stay / €53.34 with an overnight stay.
Abroad: €48 without an overnight stay / €91.35 with an overnight stay.
9. Business Meals
Business meals are one of the more controversial expenses in Spain when it comes to their recognition as deductible business expenses by the Spanish Tax Agency. As a general rule, these expenses are limited to 1% of annual turnover and should always be supported by the corresponding invoice. In addition to the general invoice details, it is advisable to document the purpose of the meal and the persons attending.
10. Private Health Insurance
Although self-employed persons in Spain are automatically covered by the public healthcare system through the Seguridad Social, many choose to take out additional private health insurance. The self-employed person’s own premiums, as well as those paid for their spouse and children under the age of 25, are fully deductible, subject to an annual limit of €500 per person.
11. Other Business-Related Expenses:
Books, courses, seminars, events, office supplies, etc.
12. Expenses That Are Difficult to Substantiate:
Under the simplified direct assessment method (estimación directa simplificada), a fixed rate of 5% may be deducted from the provisional net profit (income – expenses) for provisions and expenses that are difficult to substantiate, subject to an annual maximum of €2,000.
13. Deductible Expenses without an Invoice:
In addition to the exceptions referred to in the previous sections, the following expenses may generally also be deducted without a complete invoice:
- The self-employed person’s own Social Security contributions
- Private health insurance
- Bank charges
- Employees’ salaries
- Deductible taxes
- Certain expenses incurred abroad (supporting document indicating the applicable VAT rate)
Your PAE: Law - Spain
As a PAE (Punto de Atención al Emprendedor) authorised by the competent Spanish Ministry of Economic Affairs, our firm has direct access to the relevant public authorities, the Spanish Tax Agency and the Social Security authorities. This enables us to complete the most important administrative procedures electronically, accelerate the registration process and avoid the need for you to attend the authorities in person.
Registration as self-employed within 3 working days and without the need to visit the authorities in person. Further information.
As lawyers, tax advisors and a registered PAE, our firm will be pleased to assist you in analysing your specific situation, carrying out the relevant administrative procedures and preparing and filing the necessary tax returns. Further information about our services for self-employed professionals and business owners can be found in the section Self-Employment.
If you are interested in our services or have specific questions regarding this topic, please do not hesitate to contact us by email or telephone.
Author:
Christoph Sander
Lawyer and Tax Advisor
CEO, Partner, Director
info@sspartners.es
Tel: (+34) 951 12 13 06
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