What expenses are deductible for companies?

Updated: 24/10/22

Deductible expenses are those that a company has to incur in order to carry out its economic activity. These types of expenses are deductible, which means significant financial savings for companies.

Depending on the economic activity in which the company is engaged, it will be able to deduct certain expenses. In any case, these must be duly justified in the corresponding invoices, as well as being recorded in the company's accounts to avoid problems with the Tax Agency.

What expenses can companies deduct?

The expenses that a company may deduct are as follows:

• ExploitationThese expenses refer to everything that is directly used by the company to carry out its economic activity, such as raw materials, office supplies or fuel. Thus, a furniture manufacturing company will be able to deduct its expenditure on wood.
• Wages and salariesSalaries, special payments, allowances, remuneration in kind, indemnities and travel expenses of employees are also deductible expenses for companies. These expenses may be deducted for corporate income tax purposes.
• TaxesThere are also certain taxes that companies can deduct, as long as they are related to their business activity. Thus, companies can deduct Property Tax and Business Tax. As far as VAT is concerned, companies can deduct VAT on products that are needed to carry out their professional activity, such as computers used to carry out their work.
• Renting of the premises where the company is locatedThe following are deductible: companies may deduct the rent of the premises in which they carry out their economic activity, as well as the costs of maintenance and insurance of the property.
• Financial expensesThese expenses refer to credits or loans taken out by the company, among others.
• SuppliesBusinesses may also deduct the costs of paying for business supplies, such as electricity, water or telephone.
• Meals and vehiclesExpenses relating to meals in restaurants with customers are also deductible, provided that they are necessary for the proper conduct of the company's business. In any case, they are only deductible up to a limit of 1% of the net turnover. Particular care must be taken in this case, as the tax authorities usually take a close look at this type of expense. 
• Company vehiclesMany companies own a fleet of cars which they give to their employees for their use and enjoyment. In this way, the employee will receive a company car as payment in kind. On the other hand, companies can deduct the depreciation or the rental fee for the purchase or rental of these vehicles.
• Workers' mobile phonesThere are also many companies that offer their employees corporate mobiles which, like company cars, will constitute remuneration in kind for the employee. In this case, the employee's mobile phone will be a deductible expense for the company.

It is important to take all these expenses into account, as deducting them will save the company a considerable amount of money.