Entry into force of the new Self-Employed Law

On October 25, 2017, Law 6/2017, of October 24, on Urgent Self-Employment Reforms, was published in the BOE number 257.

In this note we collect the modifications that affect the tax field, which are aimed at allowing the deductibility of certain expenses in the field of Personal Income Tax.

Title V of the Law introduces several modifications in the wording of the Personal Income Tax Law with the purpose of clarifying the deductibility of the expenses incurred by the self-employed in the exercise of their activity, so that there is a greater degree of legal certainty.

• Supply expenses

The deductibility in personal income tax of the borne supply expenses corresponding to the part of the taxpayer’s home that is affected by the development of their economic activity is clarified.

Thus, telephone expenses; Internet; water; Electricity and gas will be deductible in the amount resulting from applying a percentage of 30% to the existing proportion between the meters of housing used for economic activity and the total surface area of the home, unless a higher or lower percentage is proven. /p>

In this way, if we have a house of 120 meters, of which we dedicate 30 meters to the activity, and the water supply expense is 150i, the taxpayer will be able to deduct as an expense 150×0.25×0.3= 11, 25i, 7.5%.

• Living expenses

The problem related to the maintenance expenses incurred by the self-employed worker in the development of their activity is resolved. These will be tax deductible as long as the following requirements are met:

• that occur in restaurant and hospitality establishments and
• that are paid using any electronic means of payment.

The deductible amount for this concept will have as a daily limit the same amounts that for maintenance expenses are established for employed workers in the Personal Income Tax Regulations, that is, in general, 26, 67 euros per day if the expense occurs in Spain or 48.08 euros if it is abroad, amounts that, in turn, are doubled if, as a result of the trip, the person spends the night.

• Entry into force

According to the provisions of the thirteenth final provision of the Law, these modifications will come into force on January 1.

Outside the tax field, the Law includes a series of measures in the labor field. The most notable are the following:

• Extension from six months to one year of the 50-euro Social Security contribution for new activities. Until now, new self-employed people paid 50 euros for the first six months. Now this flat rate is extended up to one year, in addition to allowing the activity to be resumed paying only that amount after two years of stopping the activity, while currently it is five years.

• More bonuses for young people, disabled people and women. Those under 30 years of age and women up to 35 years of age will be able to chain up to three years of Social Security contribution bonuses, depending on the evolution and situation of the business. A flat rate of 50 euros is established for women who return after maternity and a 100% exemption from the self-employed quota for 12 months for caring for minors or dependents, to guarantee a better work-family balance. Improvements for disabled entrepreneurs and also for the disabled children of the self-employed, who will be able to hire them.

• Bonuses will be compatible with the hiring of employees. The entrepreneur will maintain the assistance in contributions and the flat rate even if he hires employees. Until now, he lost these advantages if he had an employee. If the contracts are indefinite, the bonus is 100% of the social contribution.

• Greater flexibility to register and cancel Social Security. Self-employed workers may register and cancel Social Security up to three times in a year with the right to start paying from the same day of the month that they complete the administrative procedure. That is, if they register on the 14th they will no longer have to pay for the entire month. The same will happen with the withdrawal.

Therefore, we recommend that all self-employed workers take into account all these developments in order to adjust their tax and labor costs as much as possible as of January 1, 2018.