Tax benefits for the self-employed in Spain

Business start-up in Spain, Living in Spain, Self-employed in Spain, Spanish Taxation Leave a comment   Published on par Jonatan Carbonell

A self-employed person is able to decide on his own time and make decisions concerning his business. But have you ever wondered what happens when it comes to taxes? While you must comply with a series of obligations before the Tax Agency, you can also enjoy certain tax benefits. Do you want to know what they are? Here we explain them to you!

Taxes applicable to self-employed in Spain

Before introducing you to the different tax benefits to which you can apply as a self-employed, we would first like to remind you which are the taxes that you must take into account when registering with the tax authorities:

Self-employed quota

It is true that this fee does not fall under the tax classification, but it represents a payment that you have to cover on a regular basis for the simple fact of being self-employed.

In this sense, the amount to be paid will depend on the type of contribution you make, and according to the Law of Urgent Reforms of the Self-Employed Worker, during the first 12 months the initial fee to be covered is 60 euros.

Personal Income Tax (IRPF)

The IRPF declaration for self-employed must be made quarterly, presenting income and deductible expenses, as applicable. If you have been self-employed for more than two years, it corresponds to 15%, and if you have just started, it will be 7%.

Likewise, it is understood that this tax is applied according to the activity you carry out, in a progressive manner. Therefore, the more you charge, the more you will have to pay.

 Value Added Tax (VAT)

VAT, being an indirect tax, is included in the self-employed person’s invoicing, and you must file your return every three months, through form 303.

What does this mean? It is the final consumer who assumes the payment of the tax to the Treasury with every purchase he makes, but it is the self-employed person who collects the amount through his invoices.

 

You may also be interested in: How to defer the payment of taxes in Spain?

 

What are tax benefits?

When we talk about tax benefits, we refer to a series of advantages from the tax point of view, which can be taken advantage of by companies, SMEs, self-employed or individuals, at the time of filing their tax returns with the Tax Agency and thus reduce the corresponding tax burden in each case.

Likewise, it is important to emphasize that tax benefits should not be confused with tax evasion, since the latter is a criminal offense.

In the case of Spain, tax benefits are protected by law, in Article 134.2 of the Constitution, and may be granted for subjective reasons of the taxpayer, or for any activity that from a social, labor or environmental point of view is worthy of enjoying a tax advantage.

 

You may also be interested in: Basic guide to bookkeeping as a freelancer

 

Types of tax benefits for the self-employed

Currently, we can find at least five types of tax benefits to which you can apply as a freelancer. These are the following:

Exemptions

A tax exemption will exempt the self-employed from bearing the tax burden that as a general rule corresponds to him/her. We can say, then, that it is a right that allows you to exempt the payment of a tax, and can be acquired in the following cases:

When there is no tax liability, even though the taxable event has occurred. Such is the case of public benefits for birth, childbirth or adoption from the Social Security, Autonomous Communities, or local entities.

When there is a tax liability, but its payment is waived. Such is the case of the tax amnesty to regularize the tax situation.

When there is a tax liability and it is fulfilled by a payment that is subsequently refunded. Such is the case of international double taxation.

Certain professional activities may be exempt from VAT. Such is the case of private lessons on subjects corresponding to the educational system or journalistic collaborations.

Deductions

In the case of deductions, these directly affect the tax base and reduce the income subject to tax such as VAT or personal income tax, provided that as a self-employed person you meet the established requirements.

Some examples we can mention are personal income tax deductions on all operating expenses related to your professional activity, donations, employee salaries, social security contributions, leases and royalties, among others.

Bonuses

The tax benefits related to bonuses imply a reduction in the amount of the base for calculating the tax or, directly, a deduction for the payment to be made by the self-employed.

Some examples that apply as bonuses for the self-employed are: the flat rate in the social security contribution, the IRPF withholding during the first years of the start of the activity.

You may also be interested in: VAT exempt activities: in which cases does it apply?

 

Reduced rates

The reductions imply a reduction in the amount of the taxable base, i.e. on the percentage of the amount of the tax in question.

In this way, the reduced rates are applied on contributions to pension plans, compensatory pensions, annuities for food, or on the reduced VAT rates when you start your activity as a self-employed.

Tax deferral

There is the possibility of requesting a deferment or installment payment of tax debts before the Tax Agency. In this case, there is no reference to a reduction in the amount to be paid, in fact, it may imply late payment interest.

This type of request is usually required when the self-employed face a lack of liquidity or present accumulated payments that make it difficult to file taxes on the corresponding date.

In this way, for debts of less than 30,000 euros, there is the possibility of requesting a deferral of the IRPF or VAT with a limit of 12 months. On the other hand, if the amount is higher than 30,000 euros, you must provide a guarantee, guarantee, or surety insurance.

 

At TAS Consultancy we put at your disposal our tax experts to advise you in every requirement you need. Do you need to carry out your tax returns and do not know how to do it? Contact us here!

 

Published on par Jonatan Carbonell

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