Category: Tax

It’s a situation that many will recognise… You already have a day job, but someone has asked you to do a one-off task for them. Signing up for the monthly autonomo’s quota of over 270€ seems a little steep, especially as the job in question might even pay less than this! As you’re currently paying your monthly seguridad social in any case, it seems odd that you should have to pay them twice. What options do you have if you want to emit a proper invoice (“factura”) without signing up as self-employed?

According to the way the Spanish tax system works, one thing are social security payments and another thing are tax payments. The two are very different systems with limited communication between them, and it’s technically possible to sign up to pay tax without signing up to pay social security contributions.

Is this legal? This is where Spanish law gets a little hazy. At the moment, there’s currently no proper set of norms regulating this kind of activity, although this is being debated for 2017. If you are already working full-time and paying your social security, and can prove that the work is a one-off job rather than a long-term contribution to your living standards, you have arguments for showing that what you are doing is “alegal” rather than “illegal”. In practice, many people do work odd jobs without signing up to pay the self-employed quota.

Many people cite the “limit” for the amount you can earn without being officially self-employed as 3000€, as above this limit there’s other taxes and forms you’d have to sort out in any case. If you’re earning more than the minimum wage (some 9000€ yearly) from your “odd job”, you might also have some explaining to do. There is some legal precedent of people being let off fines when earning below this level, but no guarantees.

Social security aside, not paying your taxes (VAT/income tax) is definitely illegal and can get you into serious trouble. To make sure you’ve got this covered, you will need to:

• Sign up in the Hacienda as an autonomo
• Declare VAT contributions from what you’ve earned at the end of the trimestre
• Declare IRPF (income tax) in the annual Declaración de la Renta
• Sign off as an autonomo in the Hacienda when you’ve finished (important to remember this!)

There’s been a lot of controversy in the news recently about the Infanta Cristina (Spanish royal family) claiming back salsa and merengue classes at the expense of Spanish taxpayers. So, as a freelance worker in Spain, when it came to claiming a course I’d done as a cost, I was naturally somewhat nervous.

Which expenses can freelance workers justify?

A call to the Hacienda (Spanish Inland Revenue) revealed the following:

1. No, I couldn’t claim back VAT, as the course I had studied was a language course, and language courses don’t pay VAT (actually, I’m not sure any kind of course pays VAT).

2. I could list it as an expense (and thus be susceptible to a lower IRPF rate, which, under the system I fall into, is paid in function of your profits), if and only if I could suitably justify the correlation between the expense and increased profits.

Let’s take a (real – it’s mine!) example of how you might do this.

Say you want to learn French. If you’re already earning something for services rendered in French, and speak relatively good French, it the expense of something like becoming an official translator, or a language perfection course, could credibly be justified. If you have things like letters from clients asking you to learn this skill, it will help your case. Above all, your earnings from using this skill should increase after having done the course.

If you’re in doubt, I’d play on the side of caution. However, this is something that’s worth looking into, as even if you can’t claim back VAT, showing a decreased level of profit could require you to pay less IRPF.

How do I claim expenses?

In the majority of cases, IRPF is calculated via Modelo 130 and the formidable end-of-year Declaración de la Renta. So to claim the expense, all you need to do is include these costs along with your other expenses on these forms (follow the links to see exactly how to do this).

Text and photos by Penelope

This article has been updated here.

The Declaración de la Renta: what is it? Do you need to do one? If so, how do you do it? This article covers all the basics you need.

This is the simple version of the Declaración de la Renta. If you’re a freelancer in Spain, go to the longer version: how to do the Declaración de la Renta if you’re self-employed.

I should warn you that filling in the Declaración de la Renta can be frustrating. Bad software, impenetrable government vocabulary and illogical systems are all problems you will face. As I always say, if you have any doubts it’s best to hire a professional to help. You can also call the Hacienda (Inland Revenue)’s helpline, but they will only be able to assist you in Spanish.

Timescales for filling in the Declaración de la Renta run from around April – end of June.

What is the Declaración de la Renta?

The Declaración de la Renta is the annual income tax statement for Spanish citizens.

Who needs to fill in the Declaración de la Renta?

Everyone who is a Spanish resident and earns (or is donated) money in Spain needs to do the Declaración de la Renta. Anyone who earns less than 22,000€/year from just one source of income (one employer, client, etc…) is exempt. If you have more than one source of income, you may still be exempt but the pay threshold is lower.

How do I fill in the Declaración de la Renta?

I already wrote about some of this when I covered the Declaración for the self-employed. Here’s an adapted version:

Step 1: Download the programme

• Download the PADRE programme  here. You will use this to do your Declaración de la Renta.
• Now, start a new draft. If you have an electronic signature, you can import any tax data you already have.

Note: if you do not have an electronic signature (which, if you’re not self-employed, you probably don’t), you’ll need to get a reference number from the page you downloaded the programme from. Look for “OBTENGA YA > RENO”. Type in your reference number from last year, or check the “No declarante” box if this is the first time you’ve done the Declaración de la Renta.

Step 2: Fill in the Declaración de la Renta

1.1 Datos identificativos

• Declarante – your details.
• Representante – fill in if someone else (like an accountant) is doing the declaration for you.

1.2 Domicilio

• Actual – your address.
• Datos adicionales
  • “Titularidad”: if you own your accommodation, select option 1. Otherwise, select option 3 if you rent
    • If you rent, you must have a contract that proves this
  • “Referencia Catastral”: the government reference number of your home. You can find this here.

2.1 Situación Familiar

Any family members (partner, children…).

2.2 Devengo, etc.

If you’ve chosen to import all your work history, the Declaration de la Renta should complete this automatically. If you don’t see it, fill in your total yearly income (AFTER tax has been deducted) in box 1, and how much you’ve paid in social security in box 10. Check your payslips if unsure.

2.3 Asignación Tributaria

In box 105-106, tick whether you’d prefer a portion of your earnings to go to the Church (!) or social projects.

2.4 Declaración Complementaria

Leave blank unless you have an additional declaration to submit.

3.1 Rendimientos de Trabajo

Fill in anything you’ve earned in box one, and what they’ve paid you in social security in “Gastos Deducibles”.

3.2/3 Capital Mobilario

For property owners.

4.1/2

For property owners.

Sections five to fifteen are full of items for freelancers, investors, or anyone who has other income like winning a prize (would be nice!). In the majority of cases, if your only earnings have been what you’ve got from your job and you don’t receive any benefits, you can skip to the final sections.

14 Cálculo y resultado

The programme does some calculations for you. Box 14.2, which is for earnings you’ve paid tax on overseas, could also be useful.

15.1 Cálculo y resultado

15.2 Cálculo y resultado

Add any deductions for maternity leave.

Annex A.1

• This section includes deductions for buying or renovating your property, as well as adapting properties for disabled tenants.
• The next section includes deductions for money invested in starting new businesses.
• The next section involves donations.

Annexes A.2 and A.3

Some random items like earnings from Ceuta, Melilla and the Canary Islands and information for business investors. I left blank.

Annex B

Deductions for autonomous regions.

• Depending on which region you live in, you might be entitled to a deduction.
• Example: As a resident of Catalonia, I am entitled to a reduction of 10% on the rent I pay (up to max. 300€), so I fill 300 in box 842 and the details of my landlord in 841. Check through the list and Google anything you don’t recognise. You can find a guide to how much you’re entitled to claim back on rent in the various regions here.

Finally, add in your bank details, place and date.

If you’re not sure what you’re doing, this might be a particularly good opportunity to check with a professional gestor. You don’t want to miss out on anything you can claim back!

Step 3: Sending

Click on File > Presentación Telematica.

• Already got an electronic signature? Click on “certificado” and send.
• No signature? Use the RENO reference number you located at the beginning.

Hope that was not too complicated! Best of luck filling in your Declaración de la Renta.

“Modelo 303” is the Spanish quarterly VAT return form that all self-employed professionals (except VAT-exempt ones) must complete every quarter. Here’s a guide to filling in Modelo 303, with some screengrabs below to help you out.

Declaring and claiming back VAT with Modelo 303

Do you need to fill in Modelo 303? Modelo 303 must be completed by all freelancers every quarter (January, April, July, October) between the 1st and 20th day of the month. The exception is businesses who are exempt from VAT (teaching, for example, falls into this category). Non-European clients also do not pay VAT, so freelancers with solely international clients do not need to complete this.

How much VAT do I pay? Upper limit is 21%, and this applies for the majority of cases. This is calculated by adding 21% to your total earnings. It is not 21% of your total earnings. 100 + 21% is not the same as 21% of 100. So if you earn €121, you should pay €21 in VAT, and if you earn €100, you should pay €17,35.

Sign up to make declarations online. This is now obligatory.

Pay in your VAT. Work out how much VAT you need to pay, and then follow this link to go to the Government’s website where you can pay it in. Choose the option “Autoliquidaciones > Pago mediante cargo en cuenta” (pay via bank charge) and fill in your bank details. Copy down carefully the reference number you are given (you can get this back if you forget, but doing so is complicated).

Fill in Modelo 303.

Step by step, here’s how,,,

• Follow this link.
  • Choose from the heading “Si desea confeccionar y presentar el modelo de forma electrónica“.
  • You will probably need to choose the option that includes the Regimen General – the Regimen Simplificado is for those trading in agriculture, fisheries, livestock and wholesale goods).
• IVA devengado (VAT yielded). In boxes 1, 2 and 3 (and others if you have more than one VAT rate), write in your earnings (amount before VAT has been added on), VAT rate and total VAT to pay. This is added up in box 27.
• IVA deducible (VAT you’re claiming back). In box 28, write the amount of any business expenses before VAT has been deducted. To the right of this, add up all the VAT you are claiming back. Investment goods (“bienes de inversión“) include anything that costs over €600, and are added up in box 30. Add up the total in box 45, and work out the VAT you need to pay in 46.
• Información Adicional. Here you add in any extras. In box 60, for example, I am required to write down the international earnings I have which do not generate VAT.
• Resultado. Add it all up. You can also see that I’ve filled in box 67 (“Quotas a compensar…“), because last trimestre I actually came out being owed VAT and decided to reserve this to pay off future taxes with.
• Finally, tick the box that says “Resultado positivo > Ingreso total” and add in your details and the reference number you collected in Step 4. If your VAT payments have come out negative (the Hacienda owes you more than you need to pay in), you can either choose to claim this back or the option “A compensar“, which retains the amount you have been owed to claim back at a future date, like I have done here.

Finally, sign and send!

 

For a while now, the government has been muttering about a new set of reforms to the Spanish tax system. They’ll be being discussed and confirmed all throughout the month of June, but to give you a special “taster” of how taxes for “autónomos” (the self-employed) in Spain could be affected, here’s some of the proposals Rajoy’s government have come out with.

Please note that none of these proposals have been confirmed as of yet. This article is based on things I’ve heard, people I’ve spoken to and Spanish-language newspapers and blogs I’ve read. Above all, I’d like to thank the infoautonomos blog in particular for being – as always – a great source of info.

1. VAT increase to 23%

Here comes the whopper: a maximum VAT rate increase from 21 to 23% has been proposed, with many of the goods and services that currently benefit from reduced rates being reclassified and put into the highest-rate category. Let me know what you think of this in the comments box below.

2. Goodbye to the modular system

Some classes of freelance worker in Spain currently pay tax under a system of “módulos” – that is, they pay some of their taxes according to predicted rates for their sector, rather than having to present records of all their earnings. This applies to a minority of workers such as plumbers, fishers, construction workers, taxi drivers, hairdressers and some hotel and bar owners. The modular system is being phased out, and will be kept only for a very limited percentage of taxpayers.

3. Lowering business tax

Don’t get excited: the business tax (“Impuesto de Sociedades”) only applies to societies, companies and associations. Run-of-the-mill freelancers do not pay this in any case.

4. No excuses for not paying your IRPF

At the moment, some types of income are not charged IRPF income tax. An example of this is redundancy payments, which until now have been exempt from this kind of tax. The proposal is to change this, and so make all forms of income taxable.

5. The cost of hiring will be lowered

To sugar the pill of pushing up VAT, it’s been proposed that employers’ social security contributions for new employees are lowered.

 

What do you make of the new tax reforms? How will they affect you?

Photos and text by Penelope

Before you read on, you might like to check out my updated version of filling in Modelo 303 with examples.

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“Modelo 303” is a VAT return form which all self-employed people in Spain must do every quarter to declare their earnings and pay tax. If you’re going self employed in Spain you will definitely come across it at some point! The exception is if you’re in the “Regimen Simplificado” (if you are you’ll probably know about it), in which case you have your own special forms to fill in (modelos 309 and 310). Fortunately, it’s not (too) difficult to fill in, and if you have your electronic signature can even be done online by following this link (and clicking on “Presentación Modelo”).

The Modelo 303 must be filled in before the 30th January, 20th April, 20th July and 20th October each year for the past trimestre (in January, fill in for Oct-Dec during the past year, in April fill in for Jan – March etc.)

Paying tax in Spain: Modelo 303

I’ve included a PDF file of my own Modelo 303, and here I’ll talk you through it.

1. First, fill in all your details. “Ejercicio” refers to the year the form is being filled in for (2014, 2015…)
2.  The “IVA Devengado” box is where you fill in the VAT you’ve yielded from your trimester’s worth of business. In “Base imponible”, write how much your earnings were before VAT was included. In the next box, write which VAT percentage you charge (in most cases and if in doubt this is 21%) and then the total amount of VAT charged on that item of work. There are several boxes in case you charge different VAT rates. Add this up.
3. In “IVA Deducible” (my favourite box), write down all the VAT you’d like to claim back for purchases you’ve made which you needed for your business. Unless you have investments or assets (currently defined as anything worth over €600), this will all go in the box marked “Por cuotas suportodas en operaciones interiores corrientes”. Be careful! This is the box the tax inspectors like to check most carefully. If in doubt, leave it out.
4. In the next box, work out the difference and write down if you have any VAT money left over from the last tax return you did. Add in any services you’ve exported to companies who don’t have a base in Spain here, as although these don’t incur VAT the government likes to keep track of them.
5. If the total difference is positive, you can either pay online or go to a bank and ask to pay in your trimestral VAT. Mark this in “importe efectuado”.
6. If the total difference is negative (i.e. you’ve spent more in VAT on purchases for your business than you’ve accumulated to hand in), mark either the box which says “a devolver” (“To return” – only advisable if you don’t mind having a lot of questions from the Hacienda) or “a compensar” (to save and use up to pay off your next VAT return).

And that’s it! Best of luck with paying taxes in Spain.

Next: annual VAT declarations – Modelo 390.

After hearing many times that the UK system is much better for low-wage self-employed earners, I decided to do a quick comparison of the differences versus comparative benefits in tax rates for a self-employed person in each country. I tend to just write about what I know, so this comparison is based on someone who would be in my situation – a young woman doing the type of work I do (online marketing, translation and writing web copy, in case you’re interested).

Here’s the results:

The cost of being self-employed: Spain v UK

Spain

See this article for info about what each type of tax is for.

Costs

• Social security – around 50€/month for the first six months, rising to 130€ for the next six months, rising to 180€ from months 12-15 and 250€/month from then on
• VAT – 21%
• IRPF – 9% of what you earn is retained by companies, rising to 21% after the first couple of years.
• IRPF – Those of you with clients overseas (like me!) retain 20% of your profits to pay in to the Government. If over 70% of your clients retain IRPF for you, you don’t have to pay this. A percentage of the IRPF you pay in will possibly be returned to you, and you can offset the IRPF you’re taxed here against the 9/21% Spanish clients hold back for you.

Benefits

• 16 weeks paid maternity leave (around 850€/month)
• No unemployment benefit
• Paid sick leave (around 510€/month for day 4-20 and 640€/month from then on)

UK

Costs

Figures here are highly approximate, as I don’t quite understand the UK system as well and am just going on what I’ve been told. My sources say that your taxes (presumably not including VAT) come to around 20% of your earnings.

• VAT – 20%
• Council tax (say £1000/year)
• Income tax – 20% on earnings over £8,500/year
• NI contributions – Say £10 per week

Benefits

• No paid maternity leave
• No unemployment benefit
• No sick leave

Would be great to hear from readers from both countries if they think these figures sound about right. In any case, I hope it gives you a rough-and-ready idea of the different systems and what you’re up against in both. Which system would you prefer to work under?

Text and photos by Penelope

If you’re required to write a “factura” for abroad clients, you might like to start off by reading my recent entry on writing an invoice, which gives you a basic guide on how to write an invoice if you’re a self-employed person paying tax in Spain under local systems. Then, come back here and I’ll talk you through writing invoices for clients from abroad, which have a few small differences.

There are two technical terms you might hear bandied around: “intracomunitario” clients come from within the EU, and “extracomunitario” clients are non-EU. In any case, writing an invoice seems to follow the same procedure for both. This article applies to those who sell services, rather than products.

1. NIF – Instead of including the client’s NIF (“Número de Identificación Fiscal“), you’ll need to include whatever the relevant business or VAT identification number for them is.

2. Taxes – Here comes the good bit. Technically, if the business you are selling to doesn’t have an office in Spain, the work you do is realised in their country and thus falls under their norms. As a result (and please see my disclaimer below, as this is just in my own experience, and I can’t 100% guarantee it’ll be true for you), you don’t have to pay any IVA (VAT) on services sold to countries outside the EU. Neither do they have to hold back any IRPF on your behalf. This makes sense (when does not paying tax ever make sense?), because who would they pay the IRPF forwards to? Not the Spanish government, certainly.

Those trading digital services within the European Union – you might like to read this article, concerning recent VAT changes.

2.* Taxes #2 – Bear in mind, however, that if over 30% of your business comes from abroad, you’ll have to pay in 20% of your profits in IRPF every trimestre in any case. But you don’t have to put anything about this on your invoice.

3. Additional – If you’re being paid in a foreign currency, you should also put a note on your invoice to state how much this represents in Euros:
“9.999 € día 16/12/2013”

Photos and text by Penelope