IVA paid in your purchases. (With one exception). Normally the IVA included in our purchases is treated separately and only the net non-IVA amount is a deductible expense.
However if you make purchases in another EU country and obtain an invoice with foreign VAT you can include the total with VAT as expense. (As you cannot offset foreign VAT against the IVA collected in your sales you are allowed to offset it against Income Tax).
Income Tax paid. The payments made for income tax are not tax deductible.
However it’s a business deductible expense if the tax is paid for other reasons such as property tax (if the property is owned by the company) or if the tax is paid to the town hall to obtain a trading license.
Fines and overcharges. Fines and overcharges paid to the Tax Office or Social Security are not tax deductible.
To give an example, if we miss a payment of the regular autonomo fee we will need to pay a surcharge, yet we can only claim for the principal amount in our books.
Paying back a loan. The paying back of a loan is not an expense, just as receiving a loan is not an income for which we need to pay tax.
Confusion can arise if we use the loan to buy an asset.
For example, assuming that we obtain finance payable over 4 years, to buy a car, obviously every repayment represents the payment for the car, therefore it can be considered a
deductible expense… Logical as it may seem, the answer is no!
The cost of assets is offset against tax as they depreciate, or lose value, along their utility life. The official depreciation tables indicate the scale of devaluation of assets. In the case of a car, the fastest it can be depreciated is 6.25 years. This means that even if we pay the car in less than that we can only offset a maximum of 16% of its value every year (16% for 6.25 years is 100% of the value).
There are other concepts that are not tax deductible when they exceed a particular amount. In each of the following categories you will need to consider specific rules for
• Gifts to clients
• Meals and Accommodation
You can learn about the limits that you cannot exceed visiting our website