Non-Deductible Expenses in Personal Income Tax and VAT: What the Spanish Tax Agency Is Watching in 2026

With every tax season, Spain’s Tax Agency fine-tunes its cross-checking of invoices, bank movements, and returns a little further. In 2026 that scrutiny is sharper than ever, driven by the rollout of mandatory e-invoicing and automated verification systems, which makes it a costly mistake to keep deducting expenses the tax authority has been systematically rejecting for years. This isn’t strictly new regulation — it’s a tightening of how existing criteria are checked: exclusive business use, correlation with income, and complete documentary evidence.

The expenses still getting knocked down

For personal income tax, the Tax Agency remains strict on any “dual-use” expense — one that serves both the business and the self-employed person’s private life. The most common flashpoints in audits are passenger vehicles (unless the activity is explicitly transport-related, such as sales reps who are constantly on the road), clothing that isn’t clearly a uniform or work-specific gear, and meal expenses when the formal requirements are missing: payment by card or another traceable method, the daily cap, and proof that the expense arose in the course of business activity.

For VAT, the pattern is similar but with its own nuances: input VAT on passenger vehicles is presumed deductible only up to 50% unless a higher level of business use can be proven, and simplified invoices or receipts lacking the recipient’s identifying details won’t support a deduction if the Tax Agency asks for justification during an audit. Client meals and entertainment without sufficient documentation are also frequently disallowed, as are invoices from suppliers who turn out not to be properly registered or whose activity doesn’t match what’s been declared.

One point that often catches by surprise those who invoice modestly but spend regularly is that the income-expense correlation is also assessed for proportionality: a large one-off expense against steady but modest revenue is, in practice, one of the biggest triggers for information requests.

What this means for your business

For a self-employed professional or small business, this translates into very concrete decisions before closing out the quarter. First, review your vehicle policy: without an activity that justifies exclusive use, it’s not advisable to deduct 100% of the VAT or push the income tax deduction without a defensible business-use criterion, because in an audit the burden of proof falls on the taxpayer. Second, get your meal expenses in order: without card payment or another traceable method, and without a direct link to a business trip, that expense shouldn’t go into the expense ledger, no matter how routine it feels to keep the receipt. Third, review your supplier list: if a recurring supplier isn’t properly identified with a tax ID and complete details on the invoice, ask for the correction before the deduction is lost in a later review — not after.

It’s also worth applying common sense to the ratio between expenses and revenue: an atypical or disproportionate expense for your activity level deserves extra-solid documentation (a quote, a contract, an email explaining the need for it) before the Tax Agency asks for it — not once the request arrives. And above all, don’t assume an expense is fine just because “it’s always been deducted that way”: audit criteria have grown stricter, even though the underlying rule hasn’t changed.

At Zythos Business, we review quarter by quarter which expenses of our self-employed and small business clients are properly supported and which ones need reinforcing or dropping before filing the corresponding return — precisely to avoid surprises when the Tax Agency decides to look closely. Getting ahead of that scrutiny, rather than reacting to it, is what separates a smooth deduction from a costly reassessment with surcharges.