The expected tax reform falls short, although it expands pre-existing deductions

This summer, in our article "What tax measures will the new self-employed law include?",  the proposed Law of Urgent Reforms for the Self-Employed, opening a window to the possibility of deducting certain common expenses in the day-to-day life of the self-employed worker, but which until now could not be taken into account when calculating tax income, even though they constituted a certain expense for the small business owner.

On October 24, the final text of Law 6/2017, on Urgent Reforms of Self-Employment, was approved.

Although considered an advance, the text has diminished initial expectations since it leaves out the initial demand to equate the criteria in Personal Income Tax with those of VAT regarding the deduction of passenger vehicles and the expenses derived from their use, provided that these were also related to the economic activity.

Thus, the new deductions approved applicable from 1 January 2018 are limited to:

1. The possibility of deducting health insurance premiums for oneself and for one's spouse and children under 25 years of age living with one. The deduction is limited to 500 euros for each of the aforementioned individuals or 1,500 euros in the case of disability.
2. If the main residence is partially used for business purposes, 30% of the utility expenses of said residence may be deducted in proportion to the square meters^of the residence used for business purposes in relation to its total area, unless another percentage is proven.
3. The taxpayer will be allowed to deduct their own subsistence expenses incurred in the course of their business, provided that these expenses are incurred in hotels and restaurants and are paid using any electronic means of payment, within the limits established by regulation for allowances and normal subsistence expenses of workers, that is, with a quantitative limit of 26.67 euros per day or 48 euros if abroad.

It is worth noting that the regulation does not impose distance criteria to the workplace or to one's own home.

We see that the new tax regulations equate the exemption for salaried employees with that of the self-employed regarding insurance premiums and living expenses, but have omitted the deduction for private vehicles, which are so frequently used for travel necessary for business purposes. We will have to wait for a new reform, not yet planned, to include this deduction, which would better align the calculation of taxable income with the actual results of business activity.

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Alicia Conesa Garrido

Tax and accounting area director at Àmbit Assessor

A graduate in Business Administration from the University of Barcelona, ​​she has furthered her training in tax and accounting by attending courses and seminars offered by the EAE Business School, the College of Economists, the Bar Association, and the Terrassa Chamber of Commerce.
She combined her studies with work in the family business and as a substitute in the production audit department of Bimbo SA.
She has spent her professional career at Àmbit Assessor, where she joined in 1991 to support the accounting and tax department, becoming a consultant a few years later.
Since 2000, she has been the managing partner of the company.

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