Although the house is in joint property and partially affects the activity, for the purposes of deducting the costs of supplies as well as those corresponding to the ownership of the house; the square metres devoted to this activity in its entirety must be counted.
Deductible expenses of the profit-making house partially affects the economic activity
Personal income tax regulations allow the partial affectation of divisible assets to an economic activity, provided that the affected party is susceptible to a separate and independent use of the rest.
Fulfilling the aforementioned condition, it is possible to affect an economic activity the part of a house owned by a marriage in a community of property, in which one of the spouses carries out that activity.
This implies that the business or professional spouse can count as deductible expenses those derived from the ownership of the home, such as amortization, IBI, garbage rate, community of owners, etc.; proportionally to the part of the house affected, and its percentage of ownership in the property referred to.
And in relation to the expenditure arising from the Supplies of the house, such as water, gas, electricity, telephony and Internet, are deductible in the percentage resulting from applying 30% to the proportion between the square meters of the house destined to the activity with respect to its total area, unless a higher or lower percentage is proven.
On the other hand, the Personal Income Tax Act considers assets that are entirely related to the economic activity of the business spouse to be the elements common to both spouses, even if one of them does not carry out the aforementioned activity.
As a result of this rule of affectation, the personal income tax regulations establish that the use of property or joint property rights by the business or professional spouse in the development of his activity does not give rise to a deductible expense in this or to capital income in the other spouse, by the transfer of use on the part of the property corresponding to the latter.
Thus, in the event of partial affectation of a gainural dwelling to the economic activity carried out by the business or professional spouse, and with respect to the deduction of the costs of supplies and those derived from the ownership of the house, the square meters of the house intended for the activity must be computed in its entirety, even if the business or professional spouse is the owner of only 50%.
Elements affected by the activity
In order for the patrimonial element to be considered affected by the activity, the following requirementsare required:
1. Necessity. The Personal Income Tax Act considers the following assets to be affected:
- The properties in which the taxpayer’s activity is carried out.
- Those intended for economic and socio-cultural services of the staff at the service of the activity (premises intended for day-care for the care of the children of the staff, business canteen, etc.).
- In general, all those that are necessary to obtain the respective returns.
2. Use in the activity. It is required that the patrimonial elements be used for the purposes of the activity.
The following patrimonial elements are not affected:
- Those used simultaneously for economic activities and for private needs. There are certain legally established exceptions:
- Divisiblepatrimonial elements: affections are understood in the part that is actually used in the activity.
- Heritage elements used in private needs in an accessoryor notoriously irrelevant way. This is the case when they are intended for personal use on non-working days or hours during which the exercise of the activity is interrupted.
The exception does not apply to passenger cars and their trailers, mopeds, motorcycles, boats and aircraft, except for the following:
- mixed vehicles intended for the carriage of goods;
- those intended for the provision of passenger transport services for consideration;
- those intended for the provision of driver or pilot education services for consideration;
- those intended for the professional travel of commercial representatives or agents;
- those intended to be subject to transfer of use with habituality and onerousness.
- The patrimonial elements that do not appear in the accounting or official recordsof the activity that the taxpayer is obliged to carry, unless proven otherwise.
3.Common ownership of both spouses. Only the elements that are owned by him and, in the case of marriage, the assets common to both spouses can be considered elements affected by the economic activity of a taxpayer. In no case should the private property of the non-business spouse be considered to be affected by the economic activity.
This rule is linked to the lack of legal consequences for the assignment by the non-business spouse of his share in a common property to the business spouse.
Capital gains and losses derived from capital elements related to economic activities of beneficial ownership are not integrated with the income from the activity and are quantified in accordance with the rules of capital gains and losses, without applying the reducing percentages, since they are affected elements. The capital gain derived from elements of joint ownership corresponds to 50% to each of the spouses. That is to say, a criterion of civil ownership of the patrimonial elements is resorted to.
What can I deduct if I work at home?
If you are going to start an economic activity that you will develop from your home, enabling one of the rooms as an office … what expenses can you compute in your Personal Income Tax? What VAT can you deduct?
We tell you below:
Deductible expenses in personal income tax
Ownership. If you develop your activity from your home, you can deduct in your Personal Income Tax some expenses related to housing. The first group of deductible expenses is related to the ownership of the home (IBI, insurance, amortization, interest on loans for purchase, community …).
You can deduct these expenses in proportion to the area used in the activity. So, if your house is 100 m2 and you use a room of 20 m2 as an office, you can deduct as an expense of the activity 20% of these expenses.
Of supplies. The second group of deductible expenses is that of supplies (water, electricity, gas, telephone, etc.). In this case the proportional rule does not apply,but the deductible sum is obtained as follows:
- It first calculates the ratio between the area used for the activity and the total area (as in ownership costs).
- On that proportion applies 30%. The result will be the percentage of expenses for supplies that you can deduct as an expense.
Let’s take an example: Your house has an area of 105 m2 and you use for your activity an office of 17 m2 (16.19%). Your ownership costs are 3,000 euros per year and supplies costs are 3,600 euros.
Well, in this case:
- You can deduct 486 euros of ownership expenses (16.19% of 3,000 euros).
- And 175 euros of expenses for supplies (3,600 euros x 16.19% x 30%). In any case, if you can justify that the supplies attributable to the activity are higher, you can deduct that higher amount.
Deduction of input VAT
Different rules. With regard to the deductibility of VAT, the applicable rules are somewhat different.
At first glance it may seem that you will not be able to deduce anything:
- Regarding the costs of ownership, you can deduct the VAT paid in proportion to the area used (as in personal income tax). However, in general such expenses do not carry VAT, so this does not benefit you.
- With regard to supplies, the Treasury considers that you will not be able to deduct VAT in any proportion. For VAT to be deductible, expenses must be exclusive to the activity (they cannot cover personal and business needs at the same time).
DEDUCTIBLE VAT. Even so, you can deduct VAT on certain expenses:
- If you carry out works of adaptation of part of your house as an office (painting, change of tiles, parquet, etc.) or if you acquire furniture or other elements for its activity (furniture, lamps, office equipment, etc.), you can deduct all the VAT.
- Likewise, the VAT paid on expenses of repairs, reforms or maintenance of the house in proportion to the area used in the activity. If you bear these expenses through the community of neighbors, request a copy of the invoices and apply the above rule on the part of the VAT that corresponds to your property coefficient in the building.
Separate counters. Finally, regarding supplies, consider installing separate meters and phone lines. This way you can deduct the entire amount of input VAT.
Although in 2018 the deducción in the Personal Income Tax of the expenses for housing supplies has been made more flexible, the same does not happen with the VAT. Vat rates borne on suppliesorare deductible if these are exclusive to the activity.
If you have any questions about all these deductions, you can contact our advisors, in any of our offices,so that we can help you solve it as soon as possible.
