Key Personal Income Tax Allowances and Deductions for Self-Employed Workers in Spain

1. General Personal Income Tax reductions for self-employed workers

a) Reduction for net income from business activities (direct assessment)

• If a taxpayer’s net income for a tax year is below €14,450 and they do not exceed certain income thresholds, an additional reduction may be applied to net income.
• The reduction varies according to income level.

b) 20% reduction for starting a business

• Self-employed people starting an economic activity may claim a 20% reduction on positive net income during the first two tax years in which they earn a profit.
  • Condition: They must not have carried on an economic activity during the previous 12 months.
  • It applies under both direct assessment and the objective assessment (modules) regime.

2. Deductible expenses that reduce the taxable base

Self-employed workers may deduct expenses when calculating net income if they relate to the business activity and are properly documented. Examples include:

a) Household utilities (working from home)

• Self-employed people working from their main home may deduct utility expenses (water, electricity, gas, internet, etc.) equal to 30% of the proportion of the home used for business.
  • Example: If 20% of the home is used for business, 30% of that 20% may be deducted.

b) Meal expenses

• Meal expenses may be deducted if they:
  • Are incurred at restaurants or other hospitality establishments.
  • Are paid electronically.
  • Do not exceed €26.67 per day in Spain or €48.08 per day abroad. The limits double if an overnight stay away from the taxpayer’s home is required.

c) Depreciation of assets

• Assets used in the business, such as vehicles, computer equipment and furniture, may be depreciated and deducted over several years according to their useful life.

d) Vehicles and transport

• Vehicle expenses are deductible only where the vehicle is used exclusively for the business. Partial deductions may be available in certain cases, such as for sales representatives or goods transport.

e) Health insurance

• Premiums for the self-employed person’s health insurance and that of their spouse and children may be deducted up to €500 per person per year, increased to €1,500 if a family member has a disability.

f) Pension plans

• Contributions to pension plans may be deducted from the Personal Income Tax base up to an annual limit of €1,500, with up to €8,500 more available for employment pension plans.

3. Specific Personal Income Tax allowances and deductions

a) Investment in new tangible fixed assets

• Self-employed people under direct assessment may deduct 5% of net income as an investment reserve if they reinvest in new fixed assets used for their activity.

b) Maternity deduction (self-employed women)

• Self-employed women with children under three may claim up to €1,200 per child per year, plus up to €1,000 for childcare costs.

c) Disability deduction

• Self-employed people with a recognised disability may qualify for an additional reduction in their income.

d) Training deduction

• Training expenses related to the business activity may be fully deducted from the tax base.

e) Regional deductions

• Each autonomous community has specific Personal Income Tax deductions that may benefit the self-employed, including:
  • Support for dependent children.
  • Deductions for hiring employees.
  • Entrepreneurship incentives.

4. Specific reductions for self-employed workers under the modules regime

Self-employed people using objective assessment (modules) may also qualify for specific reductions, including:

• A general reduction in net income depending on the activity.
• A temporary 5% reduction in net income under the modules regime, applied in recent tax years as a support measure.
• Depreciation of investment assets.

5. Indirect relief through Social Security contributions

Although they are not directly related to Personal Income Tax, certain reductions in self-employed workers’ Social Security contributions can ease their tax burden, including:

• Flat-rate contribution (€80 per month): for the first 12 months, extendable to 24 months for certain groups.
• Additional reductions for:
  • Self-employed women returning after maternity leave.
  • People with disabilities.
  • Self-employed workers over 65 with more than 37 years of contributions, who are exempt from contributions for common contingencies.