To reduce the tax it pays, your business needs to correctly deduct its expenses. However, not everything you spend is accepted by the Tax Authority. Knowing what is deductible and how to document it makes a difference to your Corporate Income Tax (IRC).
The basic rule
For an expense to be deductible, it must be related to the company's activity and generate or maintain income. Furthermore, it must be properly documented, typically with an invoice issued with the company's Fiscal Identification Number (NIF).
Typically accepted expenses
Rent for premises, salaries and charges, outsourced supplies and services, communications, travel and accommodation related to the activity, training, software, and consumables are examples of usually deductible expenses.
Expenses with limits or penalties
Some expenses are deductible but are subject to autonomous taxation, such as vehicles, representation expenses, and per diems. Others have limits, and undocumented expenses are heavily penalised.
Non-deductible expenses
Personal expenses, fines and penalties, and expenses without valid supporting documentation are not accepted. Mixing personal expenses with company expenses is one of the most common and most penalised errors.
The importance of documentation
Without a valid invoice, with the company's NIF, the expense is not deductible, no matter how real it may be. Organising documentation throughout the year prevents the loss of costs at year-end closing.
The role of the accountant
Good accounting support ensures that all eligible expenses are considered, that they are properly classified, and that the company does not pay too much tax due to a lack of organisation.
At Grupo Your, we help your SME deduct everything it is entitled to, in a documented and secure manner. Contact us to optimise your company's costs.
