Category: Tax

If you are self-employed in Spain, it’s possible that you will need to fill in Modelo 130. This is the quarterly tax form used to declare IRPF (income tax).

These payments are advances – when you eventually fill in the yearly Declaración de la Renta in June, they will be discounted from the total.

How to fill in Modelo 130: quarterly IRPF (income tax) declarations

Before you begin

If over 70% of your clients contribute IRPF on your behalf, you don’t have to fill in Modelo 130.

• Do you need to fill in Modelo 130?
  • If more than 70% of the people you work for are businesses or other freelancers, no. These people will hold back (“retener”) and pay in IRPF for you, meaning that you don’t need to do the quarterly declaration.
  • Do you pay under the Estimación Simplificada (modular system)? You need Modelo 131 instead. If you don’t know what the Estimación Simplificada is, you’re probably not paying under it, as this is being phased out.
• When do you need to fill in Modelo 130?
  • Modelo 130 is due between the 1st and 20th day of January, April, July and October.
• How much IRPF do I need to pay with Modelo 130?
  • You will need to go through the form below to calculate exactly. If you’re not entitled to claim anything back, your total IRPF rate will be 20% of your earnings (after VAT has been taken off).

Preparation for filling in Modelo 130

• Sign up to make declarations online. This is now obligatory.
• Pay in IRPF.
  1. Go through the steps below to calculate how much IRPF you need to pay
  2. Follow this link to pay in.
  3. Choose the option “Autoliquidaciones > Pago mediante cargo en cuenta” (pay via bank charge) and fill in your bank details. Important! Copy down the reference number you are given.

How to fill in Modelo 130

1. Follow this link. Click “Presentación ejercicio 2015 y siguientes”, then “Presentación > Presentación por lotes”.
2. Identificación del ingreso: Fill in your name, social security number, the NRC reference number you recorded when you paid in your IRPF and the amount you paid in.
3. Liquidación:

Important! IRPF is cumulative – input your earnings/expenses for the whole year, and not just the trimestre you’re currently operating in.

• I. Actividades económicas en estimación directa…
  • 01: your total earnings minus VAT
  • 02: total expenses minus VAT
  • 03: the difference between the box 01 and box 02
  • 04: calculate 20% of the difference
  • 05: any IRPF you’ve previously paid in this year
  • 06: any IRPF anyone else has paid in for you
  • 07: box 04 – box 5 – box 06
• II. Actividades agrícolas, ganaderas, forestales y pesqueras…
  • Unless you work in agriculture, forestry or fishing, you don’t need to complete this.
• III. Total Liquidación.
  • 12: add together box 07 and (if you filled it in) box 11.  If negative, put a 0.
  • 13: based on your earnings in box 03, calculate how much you’re likely to earn in the full year.
    • If this is >12,000, don’t fill anything in
    • If this is <8000, you can claim back 100€. Input 100.
    • If this is between 8000-12,000, you can claim back a proportion of the 100€. For example, if you’re expecting to earn 10,000, input 50 (50€).
  • 14: the difference between 12-13
  • 15: any IRPF that was “owed” to you from previous quarters
  • 16: if you have a mortgage or are reforming a house, complete either 2% of box 03 or 2% of box 8, which you can deduct,
  • 17: box 14 – box 15 – box 16
  • 18: leave blank unless you’ve included a complementary declaration (most likely not)
  • 19: box 17 – box 18.
• Finally, sign and send!

You can also see a practice copy of Modelo 130 here.

Next: annual IRPF declarations – the Declaración de la Renta for freelancers in Spain.

Writing an invoice, or “factura” for self-employed people in Spain is pretty similar to more or less everywhere else in the world. Here’s what you need to include in your invoice/factura:

• Information about yourself:
  • Your Name, address and contact details
  • Your NIF (“Número de Identidad Fiscal” – if you’re self-employed, you can use your DNI or NIE)
• Information about the other party
  • Their business’ name and address
  • Their NIF
• Work done:
  • “Concepto” – a brief description of the work done (for example, “webpage translation”)
  • Rates and quantities

Taxes to include on your Spanish invoice

• The total before taxes is known as the “base imponible”
• You then add IVA (VAT in Spain) to this.
  • IVA is charged at 21% for everyone except those exempt
  • Divide the total before taxes by 100, multiply by 21 and add to the original amount
  • Some products and services pay reduced VAT tax rates (0%, 4% or 10%) – you should check this
• You then add IRPF (income tax in Spain).
  • For most businesses in the first couple of years, this is 7%.
  • You are not responsible for paying IRPF – the business who is hiring you must do so. This is known as “practicando retenciones” (retaining taxes).
  • Take XX% of the base imponible, and subtract it from the previous amount.
• The total you’re left with is what the business must pay you.

“Factura” (invoice) template

Some things are clearer with examples. Here’s a template of a Spanish invoice you can use:

Concepto	Tarifa	Cantidad
Clase de inglés	20€/hora	3 horas	60€
Clase de ruso	20€/hora	2 horas	40€
		Base imponible	100€
		IVA (21%)	+21€
		IRPF (7%)	-7€
		Importe total a pagar	114€

 

Of these 114€, you need to hand in 21€ VAT in your trimestral VAT declaration. The business who is paying you has to hand in 7€ when they declare their IRPF. All this has been recorded on your invoice – make sure you also add contact details to the top.

Doing your tax online is easy (well, at least not much more difficult than doing it in person). Also, you’ll save the costs of the forms which the Hacienda charge you for.

To be able to do your tax online, you’ll first need to get your electronic signature (“firma electrónica” or “certificado digital”).

Getting the certificado digital

Follow this link, which takes you to the Real Casa de la Moneda (Royal Mint). Type in your NIE (resident’s number), and you’ll be given a code. Take this code, along with your NIE and your passport, to your local Agencia Tributaria. When you get back home, download your electronic signature.

Note: Electronic signatures are attached to specific computers/tablets and specific browsers. So you won’t be able to do your tax from another computer. You can export security certificates from one device/browser to another. Try looking up “export security certificate” in Google for info on how to do this in your browser.

 

Next: do I really have to sign up as self-employed?

In addition to social security contributions, there are three common types of tax self-employed people/anyone setting up business in Spain pays.

Which taxes do self-employed people in Spain pay?

IAE

The first is the IAE (“Impuesto sobre Actividades Económicas”). Relax! As of quite recently, “physical people”, a category which covers self-employed people, don’t have to pay this. It only applies to businesses, associations and societies. Even businesses are exempt unless they’re earning more than €1,000,000 per year, by which point presumably you can afford an accountant anyway. In any case, you’ll still hear the name thrown around from time to time.

IVA

The second is “IVA” (“Impuesto sobre el Valor Añadido“), which is the direct equivalent of the UK0s VAT. VAT in Spain is currently at 21%. You might pay a lower rate depending on the kind of service or product you sell.

IRPF

The third tax is the “IRPF”, or “Impuesto sobre la Renta de Personas Físicas” (“physical people” here is the opposite of entities like companies and associations). Literally, the IRPF in the UK would be something like the poll tax (or “head tax”). Alternatively, you could say it’s the equivalent of income tax in Spain.

The IRPF is a pretty complicated topic which we’ll go into detail on elsewhere. For now, bear in mind for now that it’s something that everyone in Spain, self-employed or not, has to declare their earnings and is told accordingly what IRPF rates they need to pay in the annual Declaración de la Renta in May/June. In the first couple of years of business, you pay around 7% IRPF, and then it goes up to 15%.

If you have lived in Spain for a while and have never done the Declaración de la Renta, you should look into this. I must confess it was only in my fourth year in the country that I realised this. Fortunately, as a young person earning very little, no-one seemed to be too bothered.

You will spend around 40% of your net income on taxes in the first six months of being self-employed in Spain. You can read more extensive information on tax amounts here. Make sure you don’t undercharge for your products or services, or you’ll find it difficult to stay afloat.

Next: what is the IRPF?

We’ve all had those moments. The “eureka” ones that often strike when under the influence of a couple of glasses of wine, that say this: “wouldn’t this be a great place to open a bar /start-up/fashion boutique”. But have you really thought about how much it would cost to do so? Next time inspiration strikes, think about how much it really costs to open a business in Spain…

Costs of setting up a business in Spain – basic structure

First of all, decide what kind of business structure you’d like to operate under. The easiest and cheapest way to do things in Spain would be to work either as a self-employed “autónomo”, Assets Community (“Communidad de Bienes”) or Civil Society (“Sociedad Civil”).

• Working freelance will set you back costs of just under €300 monthly in social security payments (there’s a discount during the first two years), as well as 7-20% of your net profits in income tax. And don’t forget about VAT. See here for more information about autónomo payments in Spain.
• A Comunidad de Bienes is an agreement between two or more freelancers that allows them to share assets. As well as the “autónomo” payments, expect to pay taxes on any assets you bring to the equation if you choose to set up this kind of Business.
• A Sociedad Civil, or group of freelancers, currently pays similar rates. However, there is talk of beginning to charge this type of association the higher-rate Societies Tax rather than Income Tax as of 2016, which would make it a far less attractive option.
• If you’re looking to start up a limited company (one where the amount you can stand to lose is limited), expect to pay at least €1000 euros in administrative start-up costs as well as your taxes.

Setting up shop in Spain – additional costs (employees, licences…)

If you’re looking to hire staff, you can either contract freelancers (factor in similar costs to the above) or hire employees. Hiring employees, according to this excellent Spanish-language article, will cost you around €400/month for risk-prevention insurance and social security (and don’t forget that they’ll also have to pay income tax on the wages they earn).

Looking to open your own site? Bear in mind that, depending on what it’s used for, you’ll need to shell out for a licence. A bar licence will cost around €1,500. You’ll also need a licence on any reformation you do to the property.

And on top of that, don’t forget to add in the cost of hiring an accountant. In case you hadn’t worked out from this article, you’re going to need one!

…Is that business idea still looking so attractive now that you know the real cost of opening a business in Spain?

 

Text and photos by Penelope

If you’re an immigrant who’d like to start up a business in Spain, what are your options? Can you sign up as self-employed?

If you’re from the EU (“intracomunitario”, as it’s known in legalese), this is relatively simple (or at least, as simple as working for yourself in Spain can ever be). EU laws mean that everyone has the right to freelance in any of the member states.

But what if you’re from the States, Canada, South America or anywhere else in the world (“extracomunitario“)? What possibility do you have of working as self-employed then?

If you’re only planning on being away from your home country for a short period of time, you could sign up as self-employed and pay tax there. In the long term, however, you’ll probably want to be on the system in order to be able to use the healthcare and benefits system, and not signing up could actually be illegal. Do not fear, however – it is possible to work for yourself in Spain, even if you’re from another country – you’ll just need to show that you have the necessary resources to do so.

Process for foreign self-employed workers

If you’re coming from outside the European Union, in order to legally work for yourself in Spain, you’ll need to obtain a temporary work permit for those working for “cuenta propia” (for themselves). To do this, fill in Modelo EX07 and take it to the Spanish Consulate’s office in your own country of residence. Along with this, you’ll need to present:

• Your passport or equivalent (you must be over 16)
• Any criminal certification
• Bill of clean health (to show you don’t suffer from any of the IHR’s diseases subject to quarantine)
• Any professional qualifications you would need to carry out the business activity you propose (university degress, diplomas, etc.)
• Proof that you possess the economic capital needed to put your business idea in action
• Your business plan
• Any information about any authorisations or licenses you’ll need, and where in the process you are in obtaining these

Your application will be sent onto the Spanish Ministry of Foreign Affairs, who will process it and update you on the results. If successful, you’ll be required to move to Spain in a period of under three months, where you’ll then be able to properly sign up as self-employed with the Hacienda and Social Security (which you should also do in under three months). Your permit lasts for a year.

Your local Spanish Consulate should also be able to advise you (hopefully in your local language, too), so it might be wise to ask them to check you’re covering all your bases.

Finally, it’s also worth pointing out that foreign self-employed workers in Spain are a growing number. One would hope this will eventually pressure the authorities to reduce the amount of bureaucracy involved.

Next: signing up to do your tax online.

Source: Ministry of Employment and Social Security.

Despite my copious advice on how to fill in your tax modelos, there is one question that seems to be burning in your collective minds this month: do I really need to sign up to pay tax to work for myself at all?

Yes, tax evasion is the name of today’s article, and I’m going to try to write it in a way that is as objective as possible without incriminating myself.

As the law stands, you don’t have any choice in the matter – not paying your tax is against the rules and you are under legal obligation to do so. As such, bear in mind that this article is a hypothetical exercise only, and should not be misconstrued as anything to the contrary.

I just give some language classes, do I really need to be self-employed?

Let’s break down this particular example.

If you do pay tax…

• Means you are contributing to social security system and therefore have right to use the health system. Contributes to your pension fund.
• Entitles you to maternity leave and (I think) sick pay (although I suspect only if you are very sick indeed).
• Allow you to emit official “facturas” (invoices) when these are requested by companies
• Incurs the following costs.
• Incurs the administrative cost of filling in all those tax forms (see this article for more info on which forms you’ll need to fill in).
• Puts you on the “radar”, and as such triggers late-night fear that you’ve filled in your tax forms wrong and the Hacienda will be after you.
• If you’re self-employed, paying tax will probably not entitle you to unemployment benefit (see this article).

…and what if you don’t pay tax?

• Allows you to offer cheaper prices – you will be more competitive.
• Means you do not have to think about bureaucracy.
• Takes you off the Hacienda’s “radar”, unless you leave a paper trail behind.
• Someone you work with could rat you out to the Hacienda, resulting in disastrous and expensive consequences. They do sometimes perform workplace inspections to check everyone is legal, too.
• You will not have the same rights to use the benefit system as someone who has been “cotizando” (paying in their social security payments).
• Some companies require that you emit a proper invoice, for which you need to declare everything.
• May raise suspicion if you are not registered as employed for a significant period of time (bear in mind that, with the crisis, it’s not completely unusual for young Spaniards to go years without finding work).

You do the maths. In practice, the complications and expense of the system mean that Spain has a huge black economy, especially when it comes to casual work.

I’ve explained my own take on paying tax in the article “Why I avoid working “en negro””. That said, this only reflects my own decision, given the business model and personal philosophies under which I operate. The decision you ultimately choose to make is up to you (and the law).

What’s your take on paying your tax in Spain?

Next:

• Read this if you’re just looking to do occasional work in addition to your day job.

A combination of WordPress stats and my spider sense tells me that a lot of my readers probably work offering digital services. If this is the case for you, listen up – the laws are about to change for any trading you do within Europe.

Time was, when trading digital services with other Europeans (say, for example, you are a freelancer in Spain selling eBooks in France), you didn’t have to charge VAT. All that’s about to change.

As of 01/01/2015, new regulation dictates that digital service providers now have to charge VAT at the rate of the country they’re selling to. In the example above, you’d have to charge 20% VAT, as this reflects current French levels. Note that this only applies to B2C models – if you’re selling to businesses, tax is payable in their country and not yours.

How do I declare VAT for digital services in Spain?

• First of all, you need to sign up to the MOSS (Mini One-Stop Shop, or “Mini Ventanilla Única”). You do this by filling in the Formulario 034.

• Secondly, when the moment to pay in tax comes (at the beginning of April, July, October and January), you’ll need to fill in a special VAT declaration form. As of date of writing, this is still being finalised, but according to the Hacienda it will “probably” be Modelo 368. They have “reassured” me that they believe this will be approved before it is due in the beginning of April.

Am I selling a Digital Service?

The UK Government gives the most sensible answer to this:

‘Digital services’ includes:

• Broadcasting – the supply of television or radio programs
• Telecommunications – fixed and mobile telephony, fax and connection to the internet
• E-services – video on demand, downloaded applications (or ‘apps’), music downloads, gaming, e-books, anti-virus software and online auctions

This is a fast-changing area. These are examples rather than a complete list of digital services.

(i.e. no-one really knows)

Why were this laws introduced?

Reading between the lines, the news laws were introduced to stop e-commerce tax evaders creating a base in low-VAT countries such as Luxembourg and operating from there. Arguably, introducing the new rules means all suppliers are on a level playing field, and that you can’t be undercut when supplying to your own country by someone from outside the EU who doesn’t have to charge VAT.

As well as worrying that they’ll make their business less competitive than before, those against the new laws mainly point to the administrative headache they’ll create. In response to the question “Will the taxation of e-commerce supplies not give rise to administrative red tape”, the European Union replies with a definite “No.” We’re not so sure…

 

For more information about upcoming VAT changes for digital services sold within the European Union, please refer to the UK Gov, European Union and Spanish Government’s websites.

Text and photos by Penelope

Income tax for employees in Spain, although not directly relevant to freelancers (for whom this is a whole other story), is something lots of you come to this blog looking for, so today I thought I’d take the time to take a mini-diversion and write about it.

How much income tax do Spanish workers have to pay?

The closest Spain has to income tax is the IRPF, Impuesto Sobre la Renta de Personas Físicas or Tax on Earning of Physical People (as opposed to entities). As well as IRPF, employees in Spanish companies also pay, along with their employers, Social Seguridad (National Insurance Contributions).

The new Reforma Fiscal (Fiscal Reform) introduced in 2015 maps out changes to income tax levels in Spain in 2015-16. There are national elections in 2015, so in theory the new government could change income tax bands when they are elected, but in practice this would take too long to pass through and is unlikely.

The table at the bottom shows income tax rates as they will be over the next couple of years (full credit and many thanks to www.elblogsalmon.com for producing this). “Base imponible” refers to base yearly salary. As you can see, the main difference is that IRPF rates will be lowered – not just for those earning the lower wage brackets, but also those earning over €600,000 per year. So in real terms, while someone on a salary of €12,000 will have to pay €570 less in income tax in 2015 (presumably, the government expects that they will be able to use the extra money to buy some more logs to heat their hovel with), someone earning €600,000 will have to pay €22,487.25 less.

Photos and text by Penelope. Table showing tax rates by El Blog Salmón.

For Spain’s autonomos, a hangover may not be the worst of your worries this January 1^st. Yes, January means having to fill in your annual IVA (VAT) declaration, also known as Modelo 390.

Filling in Modelo 390 can be more than a little intimidating, due to the large amount of specialist vocabulary used within. That said, it’s an “informative” declaration only – meaning this is just for records and you don’t have to pay anything at the end.

Bear in mind that everyone in Spain who collects VAT to pay in to the Inland Revenue must fill in Modelo 390. That means more or less all autonomos. It’s paid once a year, between the 1^st – 30^th January.

Underneath is a quick description of how to fill in Modelo 390. You can also find attached an uploaded PDF with screenshots showing exactly which boxes you have to fill in (coming soon).

Filling in Modelo 390

• Preparation and accessing the declaration form

Before you begin, make sure you have a digital signature on your computer if you don’t already (instructions here).

You must first download a special programme to complete Modelo 390 with (yes, it’s that complicated!). Head to the Hacienda’s website, and click “Descarga del programa de ayuda de modelo 390”. Follow the download instructions and open the programme once downloaded to your desktop. On the screen that appears, click “Dar de alta una nueva declaración > Modelo 390 IVA”. Write your name and give a description (I chose “Declaración Anual IVA 2014”). You’re ready to go!

• Selección de Actividad

The first screen asks for your Epigrafe code. If you can’t remember what this is, you can find it in the form you originally filled in when signing up as self-employed in Spain. I found my code (899 – Profesional Genérico) by clicking on the second box (“Actividades profesionales…”) and going down to the table at the bottom.

On the next page, fill in your details. Type “NO” in the boxes asking you about concursos de acreedores (filing for bankruptcy) and criterio de caja (a special system that means you do not have to pay VAT until you receive payment from your clients), unless you have applied for either of these.

• Section 5 – Operaciones realizadas en Regimen General

We now jump to Section 5. If you’re working under the Regimen General (as opposed to the Regimen Simplificado), you’ll need to fill this in. If in doubt, this is likely – the Regimen Simplificado is mostly for fishers, farmers, etc.

In the box “Regimen Ordinario”, fill in the total amount of earnings you were taxed VAT on, and how much tax was calculated (“Cuota Devengada”). Do not take of any tax you were able to claim back at this stage. Use the base amount of your earnings – do not include any VAT to be added or any other taxes taken off. Unless any of the other boxes ring a bell, skip over to next page.

In “IVA deducible en operaciones interiors de bienes y servicios corrientes”, write down any VAT you were able to claim back off work-related puchases in Spain.

Section 6 is for the Regimen Simplificado – you’ll probably want to skip this.

• Sections 7 and 8 – Resultado and Territorio-specific

Section 7 is automatically calculated. If the Government owed you VAT from the previous year that was taken off your account (say, in the previous year you had claimed back more than you put in), put it in box 85.

Section 8 is only applicable if you live in one of the territories listed.

• Section 9 – Resultado #2

In box 96, fill in (again) the amount of VAT you paid in, this time by quarter.

• Section 10 – Volumen

In box 99, repeat the amount of taxable earnings you generated. Other boxes are related to non-VAT generating income you’ve had. For example, I filled in box 105 as I had earnings from other countries (such as the US) who I do not collect VAT for.

• Section 11 – Operaciones especificas

“Special operations” is, as the name mentions, a bit special. You probably won’t need to fill it in unless you’re up to anything funny, like acquiring other companies or goods.

• Finishing up

Save your document and go to (top left) “Archivo > Presentación de declaraciones”. Normally at this stage various alarming-looking boxes will come up with all the mistakes you’ve made. Correct these (easier than it looks) and proceed. Select your digital certificate and hit “Realizar Presentación”.

 

If you’ve managed to complete all of the previous steps correctly, you’ll be taken to a screen with a link to a PDF of your declaración (save for your records!) and the gratifying “finalizar” button.

Well done – you’ve just correctly filled in Modelo 390. Now go and celebrate the New Year!

 

Text and photos by Penelope