The IRPF (“Impuesto sobre la Renta de Personas Físicas“) is an earnings tax for all “physical people” (i.e. not companies, associations or other entities). It is the equivalent of income tax in Spain. If you freelance, the rules are particularly complicated. Some help is below.
If you’re not self-employed, check out my article on Spanish income tax for employees.
IRPF for freelancers
1. Calculating IRPF
To calculate IRPF, Spain’s income tax law differentiates between the Estimación Directa and Estimación Objectiva. The majority of businesses are in the Estimación Directa – this is definitely the default when you sign up at the Hacienda (Inland Revenue). The Estimación Objectiva (also called the “modular system”) only applies to a few kinds of business and is now being phased out. So if you don’t know, you are probably Estimación Directa.
For businesses in the Estimación Directa, IRPF is a percentage of your profits. Businesses in the “Estimación Objectiva” pay IRPF according to standard industry profits.
2. How much IRPF do you pay? How do you pay it?
An important question is whether you will be doing “professional” or “business” activity (“actividades “profesionales” or “empresariales”). “Professionals” include knowledge workers who generally have specialist training or qualifications -lawyers, translators, teachers, consultants. Business activities are more general -commerce, hospitality, etc. They are very similar, so if you’re not sure which type of service you offer, check which Epigrafe IAE you were given when you signed up with the Hacienda.
- All categories have to advance 20% of their profits (incomings less costs) in IRPF. You do this every three months at the end of the trimestre using the “Modelo 130” form.
- If you offer professional, forestry or agricultural services, your clients must also pay IRPF for you (known as “practicando retenciones”).
- When you charge your clients, you deduce IRPF from the final bill (see my article on how to write an invoice for clients).
- In your first couple of years as a self-employed person, you bill 7%. From then on, it’s 15% (if you’re offering forestry or agricultural services, this will be less).
- If in the previous year clients paid IRPF “retenciones” on more than 70% of your earnings you do not have also to collect the original 20%.
Examples
Pedro produces and sells natural beard care products. He deducts expenses from total income and pays in 20% of the remainder to the government (using Modelo 130).
Sara has been a translator for several years. Over 70% of her clients pay in IRPF for her. So she does not collect herself, but includes 15% IRPF in her invoices.
Ling is also a translator. However, as her clients are mostly from abroad, they do not pay IRPF. So she pays in 20% of her earnings each quarter using Modelo 130. Her single Spanish client also collects and pays in IRPF on the work she does with them. She includes this when she bills them.
It’s important to note that all of these payments are considered advances. In May/June, you will have to declare all of your earnings in the dreaded annual “Declaración de la Renta” (modelo 100). The government will take into account how much you earn, and how much IRPF you’ve paid in over the last year, as well as other variables (…are you a single parent? under 25?), and will decide on a suitable portion to send back to you.
What do you think about IRPF? Share your experiences in the comments section below.
Next: forms you may have to fill in as self-employed in Spain.
Hi,
First of all, thanks very much for the info on his site, it’s been a big help to me here so far! I have one question you may be able to help me with – I am working as autonimo and this is the first yearly quarter which I’ve worked. I have contacted the local Hacienda but they did not give me a direct answer. I currently have two clients; for both of which 9% IRPF is deducted each month from my invoices. Do I still need to submit a modelo 130 every quarter or is it sufficient to submit my returns on an annual basis? I have received varying answers on this topic so I would be most grateful if you could clarify this for me!
Thanks
Eugene
Hello Eugene.
To give you the short answer, no you don’t 🙂
In this official-looking document from the Hacienda, it says that “las personas físicas que desarrollen actividades profesionales no están obligadas a presentar declaración de pago fraccionado ni a efectuar ingreso alguno si, en el año natural inmediato anterior, al menos el 70 por 100 de los ingresos procedentes de dichas actividades hubieran sido objeto de retención o ingreso a cuenta“. I.e. if you’re offering professional services rather than working as an entrepreneur (which, if you have clients rather than customers, is most probably the case) and at least 70% of your clients deduct IRPF for you, you don’t have to fill in Modelo 130.
As always when giving advice, I add my disclaimer here. I’m not a professional gestor, just someone who’s been through the same process. So do make sure you check anything I say against other sources and seek professional advice if you have doubts – no liability accepted and all that jazz.
Hope this helps!
Penelope
PS Thanks for your comments as well – glad to hear you’ve found it all useful!
Hi Penelope, thanks for clearing that up, if there’s any problems I’ll just say Penelope told me;)
Haha! I’ll be hiding on a fiscal paradise in the Canaries if you do.
This is useful info, but it would be nice if the post wasn’t peppered with strange anti-tax ideology. I can understand that you would rather not pay tax than pay tax, but that’s not a reasonable proposition. The government provides you many services and they cost money. Thus they must collect taxes. Your resentment of this is unjustified.
Hello Eugene.
My case is probably unusual. I am a missionary from the US, and all of my income comes from the US. I have a permanent residency, and I am in the process of bringing my new husband over. I also rent an apartment. And I have not filed taxes here in Spain. Am I going to run into trouble?
Hey Rebecca. If you’ve been in Spain for more than 183 days per calendar year, you are a tax resident in the country. So if the US government ever communicated to the Spanish government that you were paying out on your earnings there, you’d most likely have to pay back all the tax you hadn’t paid over the time you’ve been here and then some. Given the unusualness of your situation, you might want to check with the people running the missionary programme what others’ experience has been – it could be that you’re entitled to rebates?
Hi.
I am a resident in Spain and I am self-employed and registered as autonomo. The company I work for is based in the Philippines. I am a teacher. Should I fill in the modelo 130? Also, how do I pay for my health insurance.
Hello Natalie,
Yes – you will need to fill in the 130: as the company you work for is based abroad, they will not be able to pay any of this tax in on your behalf. Healthcare in public hospitals is covered by your social security payments. You will need to request a healthcare card (“tarjeta sanitaria”) at your local CAP (Primary Attention Centre). Or you can look into private health insurance. You might also want to check out my article on tax for self-employed teachers in Spain for more info. Hope this helps!
HI,
My dad is retired resides in the USA, but has a retirement from when he lived in Spain. This year they started withholding IRPF from his retirement. Why do they take this from a retirement benefit ?
If you are retired you are not supposed to do yearly taxes.
That’s a shame – wish I knew the answer to it. Perhaps someone else does?
Hi!
First of all… I really like this blog! I have a meeting and I was looking for business vocabulary because I have to explain the difference between freelance and a “fake freelance” (falso autonomo)…anyway…… this is awesome Penelope… well-written!
Regarding to Veronica’s question, as a consultant, my answer to this question is… it depends ;D… I need more information, because there may be different scenarios… but my first guess is that your dad is not a Spanish tax resident, so the social security must be applying the non-resident rate (24% or 19%) in his pension, because, this is a taxable income.
I wanted to give you more information and I found a webpage (it is from the social security) and it says that the pension is taxed at the rate of 8%, 30% or 40%. It depends on the annual amount.
Take into account that there is a double taxation agreement between Spain and the US so your dad can claim in the US the money that has been retained here in Spain.
I hope it helps!
http://www.empleo.gob.es/es/mundo/consejerias/eeuu/preguntas/contenidos/Pensiones.htm
Many thanks for this! Really happy to know you like the blog (actually, I was thinking of doing a post on translations of common expressions… must get that done). I’m sure Veronica and others will find your response really helpful!
Hello,
I’m confused. I’m in the UK at the moment but I may move to Spain. My clients are not in Spain but in Belgium and US. Will I have to put the IRPF on my invoice? My clients will never agree to that.
Thanks!
Kind regards,
Nathalie
Hey Nathalie! No sweat – when you work with international clients, IRPF works a bit like when you work with consumers. You pay it in yourself at a rate of 20%. The forms you need to fill in to do so are the Modelo 130 every trimestre (more info here). For IRPF, you also need to do the Declaración de la Renta once a year to summarise. If you’d paid in a lot of IRPF during the year and your earnings are low, it’s likely you’ll get some of this back at this point. Hope this helps – always check my advice with other sources.
I am being offered contractor status as a teacher ( teaching aeronautical subjects to students in a major flight school in Spain) and am looking at the various costs involved to help me make the decision. I have been working as an employee for the last 18 months for this company and now, due to working reduced hours, the contractor possibility has appeared.
As this position is within the education sector, will I be forced to charge IVA ?
Great site, by the way, very informative and up to date. Info much appreciated, thank you.
Glad you like the blog. IVA is generally exempt on education and I’m pretty sure this also applies to your business model. You can always call the Hacienda on 901 33 55 33 to double check. You might also find this article on tax for self-employed teachers useful: http://selfemployedinspain.com/tax-self-employed-english-classes-spain/ Best of luck!