As a budding entrepreneur, you will quickly encounter the concept of deductible expenses and the importance of maintaining supporting documents. But what exactly are deductible expenses, and how can you maximize their benefits? This article answers these questions.
Deductible expenses: The relationship between costs and taxes
Throughout the year, you generate income from selling your products or services, referred to as your revenue. By subtracting all business-related expenses from your revenue, you determine your taxable profit, which the tax authorities use to calculate your tax liability. Essentially, the lower your profit, the less tax you pay. Therefore, increasing your business expenses can reduce your taxable income and the amount of tax you owe.
Deductible expenses: What costs are not deductible?
Not all expenses are fully deductible. Typically, you can deduct up to 50% of your expenses. For instance, if you spend €500, you might only save €250 on taxes, assuming those costs are fully deductible. Unnecessary expenses can negatively impact your finances, so it’s best to avoid them.
Deductible expenses: What costs are deductible?
Fortunately, many expenses can still be deducted as business costs, including:
- Housing costs: Rent, maintenance, utilities.
- Operating costs: Office supplies, telecommunication expenses.
- Personnel costs: Salaries, social contributions, training costs.
- Travel costs: Fuel, public transport, business trip expenses.
- Marketing and advertising costs: Campaigns, promotional materials.
Deductible expenses: How does it work?
To deduct expenses, you must prove they are business-related. Some costs are never deductible, even if they relate to your business, such as traffic fines and clothing, unless it’s professional attire like branded safety shoes.
Request an invoice
If you meet the requirements for deductible expenses and are VAT liable, you can often also deduct the VAT. This requires a VAT invoice, meaning you might need to create a business account for online purchases or request an invoice for in-store purchases.
Collect evidence
To justify your business expenses, you need to gather evidence. A VAT invoice is a strong proof, but receipts also count. With the Go Getter Expenses app you can easily scan, add, and manage all your receipts and invoices, automatically calculating the correct deductible percentage.
Keep your financial administration organized with Go Getter
Managing deductible expenses can significantly impact your tax liability as a starter. By staying informed and keeping your expenses well-documented and organized, you can ultimately reduce your taxes and maintain your business’s financial health.
Do you want to know more about how Go Getter can help your business or are you looking for a good partner? Contact us today and discover the possibilities!
