I’m sure you’ve been asked this before but what is allowable it the way of expenses against taxes? I do want to take clients out for a meal regularly, and also my two members of staff (they are both freelancers).

Also, If I buy petrol in Spain, where it is cheaper, and also only a 15-minute journey from my office/home, it that allowable and what do I need to get on the receipt from the garage?

As with most of the questions I receive, the answer should be “It depends”. You are allowed to deduct those expenses if you are on the normal accountancy regime, where you are taxed on the profit of the business. If you are on the simplified accountancy regime, most likely those expenses will not be required, as you are taxed on a percentage of your gross income.

Please note that as far as entertainment expenses, petrol, and meals, these are normally taxed, which means that although you deduct them from your income, there is an autonomous tax that will be due, to avoid misuse of this kind of expenses.

I am thinking of arranging a get together for friends and customers in December – a holiday celebration. What is allowable cost-wise as far as tax is concerned?

Can the entire event, which I am estimating will cost around €4k, be charged to tax and what can I expect to get back?

The invoice for this event can be deducted as a business cost, if this is something that will help you to generate income to your business. If you are inviting friends, perhaps this is not just a business cost.

Again you or your company will only benefit from this if are in the normal accountancy regime and pay tax based on your profit.

The total amount to consider spending depends on what is a reasonable figure. While there is no strict limit as to the total cost to allow for the event, bear in mind that it needs to be sensible and in proportion to your income.

My office is in my home, in a dedicated room which previously was a bedroom. I would like to redecorate it from scratch and also include a couple of artworks purchased locally. What do I need for the taxman to claim all the expenditure back?

If you are doing business from your home, you need to be very careful. If you can prove that you only use this specific room for your business, you could deduct it, but if you also live in the same building it would be very difficult to justify the costs, especially of artwork and decoration.

My advice is to make sure that if you have a company and work from home, you either make a rental contract of that part of the property and pay tax on that rental income, or simply do not deduct any costs that relate to the property; there would be a very thin line separating what is personal to that is your business.

Also, renting part of the property to your business in order to deduct some expenses incurred, can prevent you in the future from reinvesting in another property when you sell your home. The tax authorities could claim that if you are renting it to your business, then it is not your main residency. As some would say: you cannot have the cake and eat it.

As a social media consultant, can I charge any travel expenses to my business, such as hotels and restaurant bills and apart from receipts what documentation/notes do I need to verify the outgoings?

If you are spending money and incuring travel expenses on behalf of a client, you should have all those invoices in the name of the client and then your business invoice the expenses in a separate invoice, mentioning the Article 16 number 6 c) of the VAT code. This way, the refund of these expenses will not be taxed either in terms of income tax or VAT.

If you have those expenses billed to your business, you will still deduct them from your profit but you may end up paying an autonomous tax, to avoid the misuse of this kind of expenses.

To consult directly with the experts at AFM, email helpdesk@allfinancematters.pt

Words: Ricardo Chaves