Every recognised expense reduces taxable profit and therefore tax. Having a receipt, however, is not enough. For an expense to be recognised it has to meet specific conditions.
The three basic conditions
- It must relate to the business. The expense must be incurred for the needs of the activity, not for personal use.
- There must be a proper document. An invoice to the business tax number, not just a retail receipt.
- It must be paid in the right way. Above a certain amount, payment must be made electronically or through a bank, otherwise the expense is not recognised.
What is usually recognised
- rent for business premises with a declared lease
- electricity, water, telephone and internet bills for the business premises
- payroll and employer contributions
- purchases of goods and raw materials
- fees paid to third parties, such as an accountant, lawyer or engineer
- equipment and software, usually through depreciation
- advertising, a website and app subscriptions
Mixed expenses: where mistakes happen
Some costs serve both the business and your personal life:
- car and fuel
- mobile phone
- an office inside your home
- meals and travel
These have special rules and often only part of them is recognised. Do not put through “whatever you can get”, because in an audit the expenses that are rejected bring tax and penalties.
What is not recognised
- purchases on a retail receipt without the business details
- costs issued to the tax number of a spouse or child
- cash payments above the legal limit
- fines and surcharges owed to the state
- personal costs unrelated to the activity
Practical tips
- always ask for an invoice with the business tax number
- pay by card or bank transfer whenever possible
- send documents to your accountant every month, not at year end
- check in myDATA that expenses appear correctly
Would you like us to see which expenses you can use in your business? Contact us.
If you would like our office to handle it for you, see TAXGROUP services. For step-by-step instructions on the AADE and EFKA platforms, see our Useful guides.
Frequently asked questions
Can I put my car fuel through the business?
It depends on use and on the vehicle category. Often only part is recognised, under special rules.
If I pay a large amount in cash, is it recognised?
For amounts above the legal limit, payment must be made electronically, otherwise the expense is not recognised.
Is a retail receipt enough for a business expense?
Usually not. An invoice with the business tax number is needed.
Can I claim costs for an office at home?
Under conditions and usually only in part. It depends on whether the business address is registered at the home and on the type of expense.