Expat in Spain? Don’t Miss the 20% Start-of-Activity Tax Deduction

The start-of-activity deduction is a special tax benefit for self-employed individuals starting a new activity. It allows you to reduce 20% of your positive net income from your first year of activity (and sometimes the second year, under certain conditions), lowering the base on which your IRPF (Spanish income tax) is calculated.

Example:If your net profit in your first year is €20,000:

• Deduction: 20% of €20,000 = €4,000

• Reduced taxable income: €20,000 − €4,000 = €16,000

  
  

This deduction can make a real difference in your first-year tax liability.

Who Can Apply for This Deduction?

You can claim the deduction if you:

• Are starting a new economic activity (did not perform the same activity in the previous year).

• Use the direct estimation method (normal or simplified) to calculate your net income.

• Have a positive net income.

• Have net income under €100,000 for the calculation.

• Do not receive more than 50% of your income from an employer or entity from which you obtained employment income in the year prior to starting your activity.

  
  

Why You Should Review Your Tax Return

Even if your tax return has already been submitted, it’s possible that your accountant did not apply the start-of-activity deduction. By reviewing your declaration, you may be able to request a correction and claim the 20% deduction retroactively.

This is especially important for expats in Spain, digital nomads, and English-speaking professionals who are navigating the Spanish tax system for the first time. Ensuring every deduction is applied correctly can save you a significant amount of money.

How We Can Help

Our team specializes in expat accounting in Spain and provides English-speaking accountant services in Spain to help you maximize deductions and optimize your tax situation. Whether you are in Tenerife or anywhere else in Spain, our tax advisors offer tailored accounting services in Spain and tax solutions for digital nomads in Spain.

We can:

• Review your first-year tax return to ensure the start-of-activity deduction is applied.

• Identify other tax deductions and reliefs you may qualify for.

• Provide ongoing support to manage your taxes efficiently and legally.

  
  

Don’t leave money on the table, contact us today to review your first-year tax return and make sure you claim every deduction you’re entitled to.

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