Business expenses your tax adviser will not defend

An invoice made out to your business does not, by itself, settle whether the Spanish Tax Agency will accept the expense. The useful question is more practical: can you explain how it relates to the business, when it happened, how it was paid and what part, if any, belongs to private use?

Under direct estimation, an expense is not defensible simply because it has an invoice: it must be connected with the business, recorded, allocated correctly and properly supported. AEAT, deductible expenses under direct estimation. For a self-employed person, that is the starting point. A Spanish limited company also has to apply accounting rules and Corporation Tax adjustments.

This guide covers Spain’s common tax territory, self-employed people using direct estimation and limited companies subject to Corporation Tax. It does not cover the Basque Country, Navarre, the Canary Islands and IGIC, Ceuta, Melilla, objective estimation (módulos) or other special regimes. It is general information, not a conclusion about a particular invoice and not a substitute for reviewing your evidence file.

The evidence starts before the invoice

The connection is assessed by looking at how the expense relates to the business and the earning of income. If that relationship is not adequately supported, the deduction can be refused. AEAT, requirements for a deductible expense. “Connection” does not mean that every purchase must produce an identifiable sale on the same day. It means that you need a reasonable business explanation.

Anyone asserting a tax right must prove the facts supporting it. General Tax Law, article 105.1. The administration assesses evidence under the applicable rules; there is no single document that resolves every expense. That is why a careful tax adviser may ask for more than a PDF invoice.

Under direct estimation, an expense is not defensible simply because it has an invoice: it must be connected with the business, recorded, allocated correctly and properly supported. The invoice is the primary supporting document, but it is not privileged proof that the transaction was real; if the Spanish Tax Agency reasonably challenges it, you must also show the performance, payment and business purpose. AEAT, deductible expenses under direct estimation; AEAT, requirements for a deductible expense. A bank payment helps, but it does not by itself show that the service was performed for the business.

A simple evidence file that someone else can review

To prepare an evidence file, keep the valid invoice, contract or order, payment proof, evidence of performance, business purpose and business-use calculation. To deduct VAT, you must hold a valid supporting document; an invoice that does not meet the legal requirements does not by itself establish the right to deduct. As a general rule, income and expenses are allocated to the accrual period regardless of payment, and expenses must be recorded to be deductible for corporation tax unless a legal exception applies. Invoicing regulations, articles 6 and 7; Corporation Tax Law, article 11. Then separate the personal or corporation tax treatment from the VAT treatment. This is a control recommendation, not an official form.

In practice, the file may include:

the complete invoice or the relevant supporting document;
the contract, order, accepted quote or service terms;
a transfer, card record or bank statement connecting the payment to the invoice;
a report, delivery, advert, ticket, time record or other trace of the performance;
a short note explaining the project, customer, premises or process involved;
the calculation of the business share where there is mixed use.

The AEAT links the deductibility of business expenses to registration and the effective start of the activity, so pre-trading costs require a specific analysis and should not be presented as an automatic rule. AEAT, requirements for a deductible expense. Preparatory costs, VAT incurred before trading starts and start-up assets may follow different rules. The purchase date alone does not resolve them.

Three separate questions: personal tax, Corporation Tax and VAT

An accounting expense, an expense deductible in a direct tax and recoverable input VAT are not the same thing. An expense deductible in personal or corporation tax is not automatically deductible for VAT, which has its own use, destination and documentation requirements. VAT Law, articles 92, 94, 95, 96 and 97; AEAT, VAT deduction requirements.

Input VAT is deductible only to the extent that goods or services are used in transactions that give a right to deduct. VAT Law, articles 92.2 and 94. Pro-rata rules, exempt transactions and special sectors may alter the result. Personal income tax for a self-employed person starts with the activity’s profit, while Corporation Tax starts from a company’s accounting result and applies its own adjustments.

Goods and ordinary services used at the same time for business and private needs are, as a general rule, not treated as used directly and exclusively for the business. VAT Law, articles 95.1 and 95.2. Investment goods and specific situations have their own rules, so do not apply that sentence without checking what was bought.

For a limited company, the Corporation Tax base starts from the accounting result and is corrected by the adjustments required by the Corporation Tax Law. Law 27/2014 on Corporation Tax, article 10.3. As a general rule, income and expenses are allocated to the accrual period regardless of payment, and expenses must be recorded to be deductible unless a legal exception applies. Corporation Tax Law, article 11; AEAT, accrual and accounting recognition for Corporation Tax.

The Corporation Tax Law excludes, among other things, distributions of equity returns, recorded Corporation Tax, fines and penalties, gambling losses, non-exempt gifts and donations, actions contrary to the legal order and certain finance costs. Corporation Tax Law, article 15; AEAT, non-deductible expenses. In a limited company, finance costs are subject to the specific limits in article 16 of the Corporation Tax Law; an invoice or bank payment does not remove that analysis. Corporation Tax Law, article 16; AEAT, finance costs.

Expenses that are usually easier to defend

The AEAT guide includes, among other categories, rent, supplies, independent professionals, insurance, bank services, advertising, finance costs, depreciation, subsistence and certain taxes. AEAT, deductible expenses under direct estimation; AEAT, summary table. Appearing in a category does not remove the requirements for connection, recording, allocation and evidence.

Rent for movable or immovable property and certain royalties can be deductible when the asset or right is used for the business and the expense is correctly documented. AEAT, rent and royalties. For a premises, co-working desk or rented equipment, keep the contract, valid invoice or receipt, payment and an explanation of use. If withholding tax applies, keep the information needed for that treatment as well.

Software, professional services, banking and advertising are often straightforward to explain when the file connects the purchase to a project, customer or process. For a SaaS subscription, for example, add the user or team using it and the service’s purpose. For an advertising campaign, retain the order, creative work, dates and supplier. If an account is personal or serves more than one activity, calculate the share that genuinely belongs to the business.

Insurance needs the same discipline. A policy for premises, professional liability or business equipment has an identifiable purpose; a shareholder’s personal policy does not become a business cost because the company paid it. The file should identify the insured asset, the policyholder and the risk covered.

Training should connect with the business or with employees’ work. The programme, attendee list and connection with the role provide stronger evidence than a generic description on a bank statement. If the training is mainly personal or its business usefulness cannot be explained, the risk increases.

VAT for these expenses is considered separately: you need a valid supporting document and the goods or services must be used for transactions with a right to deduct. To deduct VAT, you must hold a valid supporting document; an invoice that does not meet the legal requirements does not by itself establish the right to deduct. VAT Law, article 97; Invoicing regulations, articles 6 and 7. Formal validity and the reality of the transaction are separate checks.

Home, phone and internet: where percentages mislead

If part of a habitual home is used for the business, ownership costs such as depreciation, local property tax and service charges are calculated in proportion to the affected floor area and the ownership percentage. AEAT, rules for affected assets. Ownership costs and supplies are different questions, and they do not use the same formula.

For supplies in a habitual home that is partly used for business, the ordinary personal income tax percentage is 30% multiplied by the proportion of affected floor area to total floor area, unless a higher or lower percentage is proved. For personal income tax, a self-employed person can deduct certain subsistence costs for their own business activity when they arise in restaurants or catering establishments and are paid electronically. AEAT, supplies in a partly affected home; AEAT, taxpayer subsistence. The formula helps calculate personal income tax. It does not authorise you to apply the same percentage to VAT.

The AEAT says that a mobile line’s costs are deductible to the extent that the line is used exclusively for the business; a purchased phone is dealt with, where applicable, through depreciation. AEAT, supplies and telephone. A personal line used to call customers does not automatically become an exclusive business line. If the business needs a separate professional line, record that decision.

VAT on supplies needs care. VAT on supplies in a property used for business and private purposes requires a real-use analysis; in 2023 the TEAC unified a criterion allowing proportionate deduction where the property forms part of the business assets and is used for business and private purposes. TEAC, RG 00/06654/2022, decision of 19 July 2023. That decision concerned water, electricity and gas and a property included in the business assets. It does not let you transfer the personal income tax 30% formula to every home.

Vehicles, travel and subsistence

Mixed-use vehicles attract disputes because one purchase is tested under different rules. For cars, trailers, mopeds and motorcycles, VAT has a 50% business-use presumption; certain vehicles and uses have a 100% presumption, and any other percentage must be proved. AEAT, deductible input VAT; VAT Law, article 95.3.

The 100% presumption covers, among other cases, goods transport in mixed vehicles, passenger transport, driver or pilot training, manufacturer tests or demonstrations, professional journeys by sales representatives or agents and surveillance. This is a VAT presumption, not an equivalent personal income tax rule. For personal income tax, the business use of an ordinary passenger car is more restricted and depends on the activity, use and available evidence.

Make the decision in three columns: the expense in personal or corporation tax, the input VAT and the business-use percentage. An expense deductible in personal or corporation tax is not automatically deductible for VAT, which has its own use, destination and documentation requirements. For cars, trailers, mopeds and motorcycles, VAT has a 50% business-use presumption; certain vehicles and uses have a 100% presumption, and any other percentage must be proved. In a limited company, customer and supplier hospitality is not automatically excluded, but its deduction is capped at 1% of the period net turnover. VAT Law, articles 92, 94 and 95; AEAT, deductible input VAT; Corporation Tax Law, article 15.e.

For a journey, keep the appointment, customer or project, origin and destination, ticket or invoice and payment proof. A mileage log can help, but it should make sense alongside the diary, calendar and activity. If a company gives a car to a shareholder or employee, add the relevant employment and benefit-in-kind analysis; “the company paid for it” is not an analysis.

For personal income tax, a self-employed person can deduct certain subsistence costs for their own business activity when they arise in restaurants or catering establishments and are paid electronically. AEAT, taxpayer subsistence. The AEAT limits published for 2025 are, in Spain, €53.34 per day with an overnight stay and €26.67 without one; abroad, €91.35 with an overnight stay and €48.08 without one. The cost must arise in a municipality different from the usual workplace and home. Keep the tax year in view: do not reuse these amounts for another year without checking the applicable manual.

Homes and hospitality expenses carry a higher risk. Input VAT on food, drink, tobacco, entertainment and hospitality for customers, employees or third parties is subject to the exclusions in article 96, except where a specific legal exception applies. VAT on supplies in a property used for business and private purposes requires a real-use analysis; in 2023 the TEAC unified a criterion allowing proportionate deduction where the property forms part of the business assets and is used for business and private purposes. VAT Law, article 96; TEAC, RG 00/06654/2022. Your own subsistence is not the same thing as a meal with a customer.

Hospitality, gifts and clothes: do not fill in the gaps

The AEAT includes customer and supplier hospitality among external services and applies a limit of 1% of net turnover. AEAT, other external services. In a limited company, customer and supplier hospitality is not automatically excluded, but its deduction is capped at 1% of the period net turnover. Corporation Tax Law, article 15.e; AEAT, gifts and donations. Being under the limit does not turn a personal gift or an unconnected expense into a deductible one.

The file for a meal or gift should identify the customer or supplier, the business reason, the attendees where relevant, the date, invoice and payment. For VAT, article 96 requires you to separate the expense treatment from the input VAT treatment: a meal may be an allowable direct expense for one tax and still have non-deductible VAT.

Clothing needs a careful answer. This guide does not set a universal rule for uniforms, protective garments or ordinary clothes. We treat ordinary clothing as high risk and, when the evidence cannot separate professional from personal use, as insufficiently supported. Where the answer depends on the facts, request a specific analysis and keep documents explaining why the purchase was made.

A matrix a tax adviser can use

A review does not need to turn every invoice into an endless argument. Classify it as one of four outcomes: admit, admit in part, request more evidence or exclude it with a reason. The explanation should identify the tax: personal income tax, Corporation Tax, VAT or more than one.

Expense type	Evidence worth gathering	What must stay separate
Rent or co-working	Contract, invoice, payment and use of space	Rent treatment and any withholding
Software and professionals	Subscription, deliverable, user or project	Direct expense and input VAT
Insurance and banking	Policy, insured object, statement or fee	Business purpose and expense owner
Advertising and training	Campaign, creative work, programme, attendees and purpose	Evidence of performance and tax treatment
Home and supplies	Plan, floor area, ownership, bills and calculation	Personal income tax and VAT calculations
Phone and internet	Line, use, contract and invoice	Business and private use
Vehicle and travel	Vehicle details, routes, diary, tickets and payment	VAT business use and personal tax analysis
Subsistence and hospitality	Date, municipality, customer, electronic payment and reason	Own subsistence and third-party hospitality
Clothing	Description of purchase and documented purpose	Professional facts and possible private use

The table helps structure the review; it does not replace the legislation. For a company, add the accounting entry, accrual period and any tax adjustment. For a self-employed person, make clear what goes into the profit calculation and how much input VAT is recovered on the return. Recoverable input VAT claimed on a VAT return is not also recorded as a personal income tax expense; non-recoverable VAT may form part of the expense or acquisition cost, depending on whether the item is a current expense or a fixed asset. AEAT, input VAT in personal income tax; AEAT, deductible taxes.

What to do when your tax adviser says “no”

Ask for four points in writing: which tax rejects the expense, which rule or criterion was applied, what evidence is missing and whether the proposal is to exclude the cost or admit only part of it. That turns a generic refusal into a decision that can be reviewed. It also prevents a VAT problem from being discussed as if it were a personal income tax problem.

If the transaction is real but the file is incomplete, gather the documents first. If the business-use percentage is missing, calculate a defensible proportion. If a statutory exclusion applies, record the reason so the same issue is not repeated. If an important interpretive doubt remains, separate the opinion from the cited rule and state clearly that there is no guarantee the Spanish Tax Agency will accept the position.

You can compare this review with the guide to correcting accounting and tax errors, what an accountant should do each quarter and what the Spanish Tax Agency knows about your business. Those guides cover controls and communication; this one stays with evidence and expense treatment. If you need to review the wider engagement, see TaxFactory’s tax and accounting service or contact the team to explain the scope. A specific situation needs its own facts and analysis.

Frequently asked questions

What requirements must an expense meet to be deductible?

It must be connected with the business, recorded, allocated correctly and supported by evidence. It must also fall outside any specific tax exclusion.

Is an invoice enough for the Spanish Tax Agency to accept an expense?

No. It is the primary supporting document, but it does not have privileged status as proof that the transaction was real. Keep the contract, delivery, payment, business purpose and evidence of use or performance.

Can I deduct a car that I use for work and personal journeys?

For VAT, there is a general 50% presumption if some business use is established, with a 100% presumption for certain vehicles and uses. Ordinary passenger cars face much stricter business-use rules for personal income tax, so the VAT percentage cannot be copied across.

Can I deduct home, phone and internet costs when I work from home?

For personal income tax, a partially affected home allows proportionate deduction of ownership costs and the 30% supply formula applied to the affected floor-area proportion, unless a different percentage is proved. A personal mobile line is not automatically deductible: the AEAT requires exclusive business use. VAT needs a separate analysis.

What should I do if my tax adviser rejects an expense?

Ask them to identify in writing the tax concerned, the rule applied, the missing evidence and whether they propose excluding the expense or admitting only part of it. If the transaction is real but the file is weak, complete the evidence before deciding; do not rely on the invoice alone.