🤓 This article was made possible through the collaboration of Xolo’s team of experts in freelance management.
Today we’re going to laser focus on a specific, but incredibly relevant topic: deductible expenses for freelancers working from home in Spain.
The global rise in the cost of living has given everybody an unwelcome pinch. Well, most of us anyway. Oprah hasn’t noticed much. The rest of us are all trying to make savings here and there so we’ve still got something left over for the festival season.
Lucky for us freelancers, we’ve got an advantage over our salaried counterparts. Despite having to pay through the nose on taxes and social security, we do get a welcome respite every trimester in the form of deductible expenses 😀.
You might already have a vague idea about deductible expenses for freelancers in Spain. But here we’re going to go all in on specific work-from-home deductions so you can avoid that sense of impending doom as you say yes to yet another party this summer.
Knowing how to claim expenses if you work from home as a freelancer is like having an air fryer: You’ll wonder how you ever lived without it and you’ll recommend it to anyone who will listen.
Having a clear understanding of what expenses are deductible as a freelancer is pretty much essential. In this article, we'll give you:
- A list of deductible expenses if you work from home
- The requirements for the Spanish Tax Agency to accept an expense as deductible
- The (relatively) new deductibles for freelancers, which were introduced in 2017
But first, some level setting and definitions.
What even are deductible expenses for freelancers in Spain?
To make money, you’ve got to spend money. These costs could be one-and-done purchases, like a new camera; or frequent payments, such as an Adobe Creative Cloud subscription, a coworking office, or even client lunches.
These all belong to the same family — expenses. And expenses can stretch a wild freelancer to their limits. [Read in the voice of David Attenborough].
For a textbook definition of deductible expenses for freelancers in Spain:
Expenses can be deductible if they are essential for your professional activity and if the Tax Agency (Agencia Tributaria) allows you to include them on your VAT (Form 303) or income tax (Form 130) declarations, which allows you to pay less tax.
Generally speaking, an expense is deductible when it’s work-related. Think sportswear for a personal trainer or a website domain for a freelancer setting up an online store. But deductible expenses for freelancers working from home in Spain also cover essentials that cross over into your personal life, like household bills, internet, and phones 🥳.
Deductible expenses have two tax advantages:
- The VAT you pay is reduced from your VAT bill at the end of the trimester
- The cost is reduced from your taxable income. Basically, if you earn €1000 but buy a €400 laptop, you get taxed as if you’ve earned €600.
“😭 I don’t know if my expense is deductible, what do I do?”
If you’ve read this section and you’re still in doubt, your expense probably isn’t deductible. But if you think it could be, you’re just not confident, no worries! Xolo users can always reach out to our team of experts for advice and we’ll be delighted to answer any questions you have.
What are examples of deductible expenses for freelancers working from home in Spain?
While working from home may seem very novel for employees, the truth is that freelancers have been doing it forever. Professions like psychology, for example, have been carried out in private homes for years.
So, if a freelancer who has a dedicated office can deduct the costs of their premises, why can’t you have the same deductible expenses if you work from home?
Well you can!
Home office deductions for freelancers in Spain are essentially the same as for self-employed office workers. However, for certain expenses, you can’t deduct 100%, because ain’t nobody gonna believe your internet is 100% for business purposes.
Let’s take Luisa’s case for a bit of context. Luisa is a freelance restaurant owner. She can deduct 100% of the costs of her restaurant because when she finishes her workday, Luisa goes home. Ramon, on the other hand, is a freelance architect who works from home. Since his studio is his house after 5 p.m., Ramon can't deduct 100% of his rent.
A list of deductible expenses for freelancers working from home in Spain
1- Rent
As mentioned before, you won't be able to deduct 100% of your home rent, so you'll have to calculate the percentage of your home you use to carry out your business take the same percentage from your rent, and deduct that. Quick note: You'll need two rental contracts under your name, one as a tenant and another as a workplace, which should reflect VAT.
2- If you own a house
If it's your house, first of all, well done, you’re on the property ladder. You’ll also be pleased to know you have work-from-home deductions on home insurance, community fees, and property tax. Just like in the previous case, you'll have to calculate the percentage of the house you use for your activities. We’d recommend that your workspace is easily identifiable and used exclusively for work, so you won't have any issues if the tax agency (Agencia Tributaria) comes knocking.
3- Household utilities (water, electricity, gas, and internet)
If it wasn’t hard enough to estimate what percentage of your home is your workspace, the utilities are even trickier. The formula the Agencia Tributaria applies is as follows: you can deduct 30% of the percentage of the total square meters you use for work.
Maybe try reading that again a few times. Still not getting it? Here's an example:
Sarah is a freelance psychologist who works from home in a 100m2 apartment. Her consultation room is 40m2, so she uses 40% of her house for her work. From this 40%, we calculate the 30% deduction of utilities and get 12% — the deduction she can apply to her utilities.
Although at the end of the month, you won't see a big difference, you'll notice significant annual savings.
4- Other items (phone, office supplies, freelance accounting services, etc.)
There are a lot of seemingly grey areas when talking about expenses for freelancers who are working from home. If your house is your office, is office material considered domestic or work-related?
Home office deductions are naturally the most sensitive in the eyes of the Agencia Tributaria, but as long as you can justify that they’re business-related, you’ll be fine. For example, you can easily justify office supplies such as a printer or a chair in your list of deductible expenses without fear of repercussions.
One thing to remember, however, is that for expenses over €300, you have to deduct a percentage of the purchase value each year. Called amortización in Spanish, this involves getting your deductions over the lifespan of your product, rather than all in one whack in the same month you buy it.
If you’ve hired an accounting service (like Xolo, for example 💅) to handle your freelance paperwork, the cost of your monthly subscription is 100% deductible. We even upload your invoice to our platform automatically so you have nothing to worry about.
Tax Agency requirements for deductible expenses for freelancers working from home in Spain
The Agencia Tributaria is quite picky about deductible expenses for freelancers working from home in Spain, so make sure to comply with the following requirements:
1- Keep your invoices! Essential for deducting freelance expenses
To avoid mistakes when deducting expenses, you need to keep invoices and make sure they’re in your name. The Agencia Tributaria can ask for explanations up to five years later 🤯, so get a digital folder and save copies.
But the operative word here is “invoice”.
What’s the difference between an invoice and a receipt?
A proper invoice contains:
- Invoice number
- Issue date
- Provider information: name, ID, and fiscal address
- Client information: name and surname, ID, and fiscal address
- Description of the goods or services purchased
- Price of the goods or services pre-tax
- Applied VAT percentage (remember that invoices from outside the EU or within the EU when you're an intra-community operator do not include VAT)
- Total amount
With Xolo, you can effortlessly upload all your expense invoices directly on our platform. With everything in one place, nothing slips through the net. And if you don't know what you can deduct, our local experts will be happy to help you lower your tax bill.
2- Your work-from-home deductions must be directly related to your work
Yes, you might have an intense-focus-ambient-lo-fi-chill-study playlist you feel like you can’t work without. But no, your Spotify Premium invoice doesn’t fall into the Agencia Tributaria’s idea of deductible expenses for freelancers working from home in Spain.
Any expense you want to deduct needs to be essential for work.
Could you run your business without internet? The vast majority of freelancers would say no, so it's easier for the Tax Agency to accept it is a deductible expense.
As experts in the field, we’d advise you not to push your luck on deductible expenses. Any dubious claims are only likely to draw suspicion.
3- Keep accounting records of your deductible expenses
If you ever come under audit (siren sound), you’ll be in a much better position if you have all your deductible expenses, including your work-from-home deductibles, properly recorded in a handwritten or digital expense ledger.
Hint hint: If you’re not sure what you’re doing here, we know some specialists in freelance life in Spain who can give you a hand 🤫!
4- Include your deductions in your quarterly declarations
Now onto the practical part. You can’t just send a bunch of receipts in a sealed envelope to the tax man and hope it will all be fine. Much of freelance life in Spain revolves around forms and every quarter, you’ll submit Form 130 for income tax and Form 303 for VAT.
Within these forms, there’s a section for you to include the amount you’ve paid on deductible expenses and the amount of tax to be deducted.
Sure, if you’ve ever seen these forms and the language on them (can any human actually be expected to know what “sujeto pasivo destinatario de operaciones acogidas al régimen especial del criterio de caja” means?), you’d probably prefer to cuddle a cactus. That’s why almost all freelancers in Spain turn to accountants like Xolo to stay sane.
How deductible expenses for freelancers working from home in Spain changed after the urgent reforms law
In October 2017, the urgent reforms law was approved, which included two new deductible expenses that freelancers in Spain can now declare:
Supplies
As we mentioned earlier, this change was especially beneficial for freelancers who work from home. You can report it through form 036 or 037 and get a 30% deduction on water, electricity, gas, and internet expenses.
Food allowances
This law allows freelancers to deduct a total of €26.67 per day in restaurants and €53.34 if the trip involves an overnight stay within Spain. Make sure to pay by card and get a receipt to fully justify your purchase.
Special deductions
This section includes everything from company car expenses to the new equipment you've had to buy as a work-from-home freelancer. As long as you can show they’re essential for your business, they go on the list.
An example of deductible expenses: Dan, the freelance photographer
To make things crystal clear, we’ll leave you with a quick case study so you can see the theory in practice.
Dan is a freelance photographer who has to file his quarterly VAT return.
This quarter, the total amount of money coming into Dan’s account was €6,000. This tells us that his earnings were €4,958.68 and the remaining €1,041.32 is his clients’ 21% VAT payments, which he holds onto and hopefully doesn’t spend.
But he also has business-related expense invoices totaling €300. This means the cost of his expenses was €237, with the remaining €63 being his 21% VAT.
So now he keeps €63 of his clients’ VAT payments and pays the remaining €978.32 to the tax man. Sure, nobody ever wants to pay €978.32, but when you fully grasp that the money was never his in the first place, it softens the blow somewhat. He can now take that €63 and reinvest it in his business, or use it to fund his tour of Barcelona’s neighborhood street parties 🍻.
Xolo: The easy way to stay on top of your expenses
Now that you know the theory of how to claim expenses if you work from home as a freelancer, you can dedicate a few valuable hours a month to making sure you’ve filled in those quarterly tax returns perfectly.
OR
You can give Xolo a go. Simply upload all your invoices to our easy-to-use platform and we’ll magic up a professional quarterly return while you live your best life.
When it comes to the admin side of self-employment, it’s best to take the path of least resistance. So sign up to Xolo today and take the stress out of deductible expenses.
About James
James McKenna has been a freelancer since 2017, working in subtitling, translation, and his main passion — writing. He loves nothing more than falling down a rabbit hole, a habit that has helped him specialize in areas as diverse as biotech, climate change, higher education, and business strategy.
Based in Barcelona, James learned the ropes the hard way, making mistakes that turned into valuable learning experiences. After working hard to establish himself, he is now working smart, and is always on the lookout for ways to streamline his business.