Walter FinchTHEY have long borne a heavy tax burden in Spain, but a new directive that comes into effect next year may leave autonomos (freelancers) smiling.
The Treasury and self-employed workers’ organisations are studying the possibility of abolishing the requirement for self-employed workers and companies earning under €85,000 to pay IVA (VAT).
Currently, they must include IVA in their invoices and file a quarterly tax return, known as form 303.
Under EU Directive 2020/285, these groups will have the option to opt out entirely, or make just one annual declaration instead.
Although the EU-wide regulation in fact came into effect in 2020, Spain has not yet implemented it.
But a looming January 1 deadline for EU countries to get cracking and ‘remove’ this tax from some self-employed workers has focused the government’s attention.
The European Commision is pushing members to implement the directive because charging autonomos IVA ‘has a negative impact on competition’.
It hopes that the new rule will simplify the tax burden and reduce overheads for freelancers, allowing them in turn to offer prices that don’t have IVA tacked on.
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“In order to address this issue and avoid further distortions, small businesses established in Member States other than that in which VAT is due should also be able to benefit from the exemption,” the EC added.
There are some downsides to embracing the new regime, however.
Self-employed workers will lose the opportunity to deduct IVA from their tax bill, and they will be restricted to increasing turnover by no more than 10% annually – although the EU is considering raising it to 25%.
They will also have to file personal income tax returns.
So how does one apply for this new IVA exemption? Although set to come into effect in just six weeks, official guidelines on the new directive are yet to be published.
La Caixa’s Microbank blog has surmised that: “You will most likely have to submit your income tax returns, invoices and other documents proving your annual turnover is within the established limits to the Tax Agency.”
