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Regulatory developments 2017

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Main tax changes introduced by Law 6/2017, of October 24, on urgent reforms to self-employment.

PERSONAL INCOME TAX (IRPF)

Deductibility of household utility expenses partially attributable to economic activity and maintenance expenses incurred in the course of directly estimated economic activity.

Article 11 of Law 6/2017 adds letters b) and c), with effect from 1 January 2018, to rule 5 of section 2 of article 30 of Law 35/2006, of 28 November, on Personal Income Tax, in the following terms:

I. Taxpayers whose habitual residence is partially used for their economic activity.

In these cases, household utility expenses incurred in the home, such as water, gas, electricity, phone and Internet supplies are tax deductible.

These expenses shall be deductible in the percentage resulting from applying 30 percent to the proportion existing between the square metres of the home used for the economic activity with respect to the total surface space, unless a greater or lower percentage can be proven.

The procedure for calculating the deductible amount of these expenses is shown as follows:

The habitual residence of a taxpayer is 100 m². The taxpayer occupies 40 m² of this for the purposes of the economic activity. Annual utilities come to 5,000 euros.

Proportion of the habitual residence affected: 40 m² / 100 m² = 40%

Deduction percentage = 30% x 40% = 12%

Deductible expenses: € 5,000 x 12% = €600

II. II. Subsistence costs incurred by the taxpayer themselves in the course of economic activity.

To determine the net earnings on economic activity based on the direct estimate tax scheme, taxpayers can deduct any maintenance costs that meet the following requirements:

  • The must be expenses incurred by the taxpayer themselves.

  • They must be incurred during the course of the economic activity.

  • They must be incurred in hotels and restaurant establishments.

  • They must be paid using any electronic payment method.

These expenses will be capped at the regulatory maximums set for allowances and allocations for normal workers' subsistence allowances as set forth in article 9.A.3.a) of Royal Decree 439/2007 of 30 March, which approves the Personal Income Tax Regulations