As we announced in our last article, the New Spanish Law for contractors and freelancers reforming Self Employed conditions came into force on the 1st of January 2018. These are some of the new measures that bring more clarity and benefit to the freelance worker:
1. VAT Deductible expenses for self-employed people working from home.
Contractors working from home can deduct a percentage of the total home surface used for business. This must be negotiated in advance with the tax office.
2. Utilities and other property-related deductible expenses.
Part of their utilities are deductible such as; council tax, property management fees, house insurance, rent, electricity, gas, water, telephone and internet bills. Utility Bills can be deducted applying 30% to the total house area used for business.
- E.G. A freelancer working from home has a house electricity bill per amount of €100 plus €21 VAT; as this uses only the 20% of the place for professional activities the VAT amount this can deduct is the following: 21 x 20% x 30% = €1,26 on VAT
3. Accommodation and meals allowances related to business.
Food, meals and accommodation which take place during the development of professional activities will be exempt from income tax with the limited amounts detailed on the chart below:
|Overnight stay||Not overnight stay|
|Spain||53,34 Euros per day||26,67 Euros per day|
|Abroad||91,35 Euros per day||48,08 Euros per day|
How can you deduct these expenses:
- Expenses related to working days and linked to professional activities
- Expenses being paid with debit or credit card or through a bank transfer
- Expenses with a proof of payment document that indicates date, intention and verified payment
- Expenses related to restaurants and catering establishments. Petrol stations or groceries will not be deductible.
4. Other deductible expenses in the spanish law for contractors and freelancers
Health insurance premium – which covers the insured; wife or husband and children under 25. Maximum deduction limit will be 500 Euros per person and 1,500 Euros per person for those with a disability.
Mobile phone – If you only have one mobile line, the Spanish Tax Office will allow you to allocate 50% of the cost and they will consider the remaining 50% as personal calls. In this case it would be preferable to have one line for professional calls and another one for personal use, the expenses from the professional line can be deducted 100%.
Social Security Fees – Social security contributions for hiring workers plus those corresponding to self employment.
Other relevant measures
A Flat Social Security rate of 50 Euros per month is extended to 1 year, and from month 13 and up to month 18 of 50% deduction on their basic contributions and from month 19 up to 2 years, this deduction will be 30% on their basic contribution. This incentive is applied to new freelancers and existing freelancers up to 2 years with the purpose of promoting self-employment and entrepreneurship. Self-employed that are company directors are not under this flat rate scope.
Commuting Work Accidents – Freelancers are now covered by commuting accident known as “the accident in itinere” that hedges accidents occurred during transits to the establishment where this habitually carries out an economic or professional activity.
Maternity, paternity and adoption are subsidized – those self-employed workers who take a leave period due to maternity, paternity, adoption or due to a health risk during the pregnancy, will enjoy a flat rate of 50 Euros upon re-joining the professional activity up to two years following the date of birth; for a period of twelve months. If a self-employed person needs to hire a worker while on leave, her/his quota will also be subsidized.
Spanish Law for Contractors and Freelancers: Del Canto Chambers advise Self-Employed and entrepreneurs in Spain who decide to become tax residents and carry out their business in Spain, please contact us or give us a call on +34 91 080 08 84.