Taxes and social security for freelancers and the self-employed in Spain
Freelancers and self-employed workers in Spain have to pay income tax and VAT on profits, as well as make social security contributions.
If you register as a freelancer or self-employed person living in Spain, you will pay taxes at the same rates as everyone else. But how and when you pay your Spanish taxes depend on what type of work you are doing in Spain.
When you register with the Spanish tax office and social security, they will ask you to categorise your business for this reason. Independent professionals (profesionales autonomos) usually pay through a retention (retencion) system whereby customers keep back a percentage of the invoice to pay to the tax office on your behalf. Business or trading self-employed people (empresarios individuales) usually pay 20 percent tax up front every quarter themselves. Read how to set up as a freelancer or self-employed person living in Spain
Freelancers and the self-employed in Spain also have to make contributions to the Spanish social security system through the Special Regime for Autonomous Workers (Régimen Especial de Trabajadores Autónomos or RETA).
Here TGS Edisa explains taxes and the social security system for self-employed workers and freelancers in Spain. The information contained in this article is a guide only and you should seek specialist advice regarding your specific circumstances.
Paying income tax in Spain
Freelancers and the self-employed pay income tax Impuesto sobre la Renta de Personas Físicas (IRPF) or personal income tax at the same rate as everyone else. Every year, you must complete a tax return (Declaración de la Renta) on Modelo 100, summarising how much tax you have paid during the year. Some freelancers will also have to complete quarterly declarations on Modelo 130 (see below). For more information on tax rates, personal allowances and tax returns, see Expatica's guide to taxation in Spain.
IRPF for freelancers and the self-employed can be calculated in two ways:
Estimación Directa, which calculates tax based on your own profits;
Estimación Objetiva, which compares your profits to the standard profits in your sector to calculate a tax payable in modules (this is the less common option).
Depending on the nature of your work, you may then pay the tax in two different ways: withheld tax or retention of income (retenciones) and up-front payments.
Withheld tax or retention of income (retenciones)
If you are an autonomo offering professional services, or forestry or agricultural services, whenever you invoice another autonomo or business in Spain, that business has to retain a percentage of your invoice to pay to the tax office as advance income tax on your behalf. In 2016, the retention rate is 15 percent. The rate is reduced to 7 percent for the first three calendar years of business. The retentions are credited to your tax bill.
There is no retention if you are invoicing a private individual, a business outside Spain, or if you are a trading autonomo (empresario individual).
Advance tax payments in Spain
Unless 70 percent of the people you work for are businesses that are paying retained tax on your behalf (see above), you will have to complete Modelo 130 every quarter and pay 20 percent of your profits to the tax office as advance tax payments. If you are paying tax under the modular system (estimación objetiva) then you have to use Modelo 131. The form must be completed between the 1st and 20th day of each quarter: January, April, July and October.
You can claim deductions on your tax return for the following, provided you have a proper invoices and receipts:
- social security contributions;
- expenses such as accounting and tax services;
- professional subscriptions;
- office expenses;
- phone and internet;
- any vehicles that you use for work.
Paying social security in Spain
If you are earning more than the annual Spanish minimum wage (EUR 9,173 in 2016) as a self-employed worker or an autonomo, you will have to pay social security contributions. If you are eligible and don’t pay social security, you won’t get the benefits. These contributions entitle you to health care and, after you’ve paid into the scheme for 15 years, a pension. You can pay more than the basic amount to get a higher pension, or make additional contributions to be covered for accidents or sickness at work.
Most autonomos pay a flat rate of around EUR 265 a month, no matter how much or how little you earn. You have to make the payments even if you don’t earn anything one month, so make arrangements to cover payments if necessary.
It is sometimes possible to pay less. For example, if you have not registered as an autonomo in the past five years, you can apply for an 80 percent discount for the first six months, 50 percent discount for the next six months and 30 percent discount for the last three months. Those under 30 can benefit from similar discounts. Women returning after maternity can claim 100 percent discount for 12 months.
You have to pay 21 percent IVA (Impuesto sobre el Valor Añadido) or VAT however low your annual turnover is, although some goods and services, such as educational services, are exempt.
You have to pay VAT every January, but have to report your VAT every quarter and also complete an annual IVA (VAT) declaration or Modelo 390, which you can do online through the Agencia Tributaria. If you provide exempt services, you don’t have to submit a VAT return and you cannot reclaim VAT on your own costs.
VAT within the EU
You may be exempt for paying VAT on goods and services if you are dealing with business customers (ie. VAT registered) outside of Spain but within the EU, as they pay the VAT at their country’s rate at their end. If you intend on doing this, you need to register this with the Agencia Tributaria to receive a special tax number, and will need to make quarterly declarations about your ‘intra-community’ business. As of January 2015, if you are selling digital services to consumers within the EU, you now have to charge VAT at the rate of your customer’s country.
Keeping records and documentation
You will have to keep careful records for income tax and VAT – not only for submitting your quarterly tax records but also in case you are ever audited or want to claim any tax reductions. Keep copies of all your invoices (facturas) and all your receipts.
Spanish invoices should include the following information:
- Your business name
- Address and contact details (phone, email, website)
- Your business ID number (NIE or DNI number)
- Description of your product or service
- Invoice amount, including VAT (IVA) if applicable
- Terms of payment and how you would like to be paid (eg. bank transfer, with account number etc.).
- Agencia Tributaria, the Spanish tax authority, for information on all aspects of tax in Spain for individuals and companies.
- Spanish social security for information on social security.
For more information
- Setting up as a freelancer or working as self-employed in Spain
- Starting a business in Spain
- Taxation in Spain
Expatica / Updated by TGS Edisa
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