The difficult mission of being self-employed

One of the most common headaches involved in the difficult mission of being self-employed is to know what expenses can be deducted and what not. Until now, the Treasury has applied a very restrictive criterion and only accepted bills or invoices that had a very direct relationship with the self-employed's job, which left out a wide range of expenses that also had to do with work, for example, meals with clients (and the big question: when can it be considered a business meal?) or promotional gifts or even transport. Now a supreme Court ruling has established that deductible expenses are all those that have to do with public relations with customers and suppliers -such as lunches and dinners in restaurants-, as well as gifts to both customers and employees as well as promotional expenses.

This is a substantial change that will allow millions of self-employed people to be able to deduct more expenses and thus get a better tax deal. It is clear that, in today's world, everything to do with public relations has a direct or indirect impact on the bottom line of any business or freelancer. They are, therefore, an investment and have to be treated as such for tax purposes. This does not mean that there are no specific cases in which there may be an abuse, since we are used to reading news in which businessmen investigated for tax fraud passed off as business expenses what were undoubtedly personal expenses, such as the purchase of luxury cars or second homes. But we cannot punish the vast majority of self-employed by denying them the right to deduct expenses that are essential for the proper functioning of their business or their activity because of these abuses.

The ruling already warns that "there is no precise regulation on what ought to be understood as an adequate correlation between income and expenses", but argues that both are part of the set of actions aimed at obtaining a better business result. This "justifies that the relationship between expenses and income can be both direct and indirect". It will be the mission of the Treasury, then, to find out if these lunches or dinners conform to the spirit of the law and the ruling without denying it from the outset, which is what it has done up until now.

It is to be congratulated for a sentence that favours the position of the self-employed with regards to the administration, since this is precisely a group eternally forgotten by the different governments, as has been seen with particular harshness during the pandemic, in which hundreds of thousands of jobs have been lost. The Spanish government still has to deal with another of the sector's major demands, which is to adjust the taxes to real income. The plans of the executive are to implement the reform over the next year, with the aim that the majority will see their taxes reduced at the expense of increasing tax for those who earn more. In any case, the various administrations would have to give more incentives, including tax, for the self-employed, with the dual aim of promoting economic activity and combating fraud.