Hey digital nomad, you can enjoy the easy-going life of working in Spain while working freelance with foreign clients. Yes, the sky is the limit!
If only paying taxes and social security contributions was just as magical as embarking on this flight of freedom. If you're having doubts about how to work freelance in Spain for a foreign client, then you've come to the right place. So read on and soar through the sky, freelance bird.
Although invoicing a foreign client is not very different from doing it to a client from your own country, here are some questions you'll have to ask yourself to decide the ideal tax treatment and the right way to invoice a client:
If you're offering freelance services to clients from other countries inside the European Union, then the first step you'll have to take is registering yourself. Yes, you'll have to register yourself in the Registry of Intra-Community Operators (known as ROI or Registro de Operadores Intra-Comunitarios in Spanish).
Why? Because all of the companies and freelance professionals registered at the ROI will be except Value Added Tax, VAT (Impuesto de Valor Agregado, or IVA in Spanish).
To ask the Spanish Treasury to allow you to be in the ROI, you'll have to fill out Form 036. Most importantly: boxes 582 and 584. You can do this through the Electronic Office of the Spanish Treasury. The request can take weeks or months to be accepted or denied. After that request, you're going to receive a NIF-VAT number that you'll have to include in your invoices whenever you are carrying intra-community operations.
Check out the website: ec.europa.eu/taxation_customs/ and type your client's registered company name.
Once you've been approved for the ROI, make sure you include the following in your invoice:
If you or a client isn't registered at the ROI or is an independent entity in Spain, you'll have to add the corresponding Spanish VAT. Which is typically 21% of your services. There are also two exceptions where you'll have to include VAT in your invoice, but this time from your client's place of origin:
Tax Form 303: if you are declaring business-to-business invoices exempt from VAT, you'll have to fill out box 59 in this form.
Tax Form 349: If you're declaring transactions inside the European Union, then you'll have to fill out Box 59
Tax Form 390: When you're filling out quarterly taxes, you'll have to fill out box 103.
You are exempt from paying VAT when you have a foreign client outside the European Union, either be an individual (or particular in Spanish), professional services, or a company. This is because according to Spanish law, you are exporting your services.
In the case that you're dealing with merchandise, to issue an invoice to a foreign supplier without VAT you will have to justify that the merchandise has effectively left the national territory within a maximum period of 30 days with the appropriate documentation, such as the Single Customs Document.
If the Spanish Treasury (Hacienda) decides that you've been living and conducting most of your economic activities in Spain, you'll have to pay taxes in Spain. So how do the Spanish entities actually decide that you are a tax resident in Spain?
Getting a Tax Residency Certificate is an excellent idea to avoid double taxation. You should also check if Spain has signed a treaty with the foreign country your client is located to prevent you from double taxation. The good news is that there are already 103 countries that have signed this treaty with Spain. You can check if your client's country qualifies on the following Treasury of Spain site.
Tax Form 303: When you do declare your quarterly taxes. This is the same form as for clients inside the EU but filling out box 120.
Tax Form 390: When you declare your annual taxes (in Spanish: Declaración de Renta Anual). You'll have to fill out box 110.
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