Self-Employed– Published Tuesday, August 08th of 2017

The concept and the amounts of what can be deducted from self-employed workers has always been a point of contention between the tax authorities and those affected, especially if they have their own facilities and conduct their activity from home.

In the recent times and until this moment – and after several consultations with the Directorate General of Taxes – AEAT officials have maintained that there were a number of expenses that can be deducted in proportion to the residence space for vocational or business (mortgage payment, property tax, garbage fee or community costs) but the prorated deduction of what can be considered as cost of supplies (water, electricity, gas, heating and telephone) were not allowed because under AEAT this consumption is only deductible when linked exclusively to the activity, which was unenforceable in this case.

Now a judgment of the Superior Court of Madrid contradicts that view and argues that “… it is illogical that the interpretation of the Directorate General of Taxes excludes supplies…”

Predictably, this decision will be appealed by the Treasury, but self-employed people in this situation now have a strong argument for making the deduction, but it may lead to a sanction. In any case, this decision opens the door to expand the deductibility of input VAT, but certainly this is a matter for another day.