Self Employed in Spain

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:

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