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November 2, 2022
Micaela Di Julio

What are the costs of being a freelancer in Spain?

Yes, the independence, freedom, and overall experience of being a freelancer in Spain are well worth the ride. But hey! Even being your own boss has a price.

If you're wondering what the costs of being self-employed in Spain are, then you came to the right place. Keep reading to get more information about the taxes, fees, and overall expenses of being a freelancer (autónomo) in Spain. Hop on, let's get some real insight of how much the gas and maintenance are worth in this self-employment liberty ride.

The Essential Guide: the cost of self-employed taxes in Spain:

No, the anti-freelancer grim reaper doesn't just come at night and take a percentage of your savings. The two Spanish authorities you'll have to respond as a freelancer (autónomo) are the national tax authorities (la Agencia Tributaria or Hacienda) and Social Security (Seguridad Social). We'll introduce you to the Spanish tax authority first. Don't be shy and say hi!

It's a freelance world after all!

Hello, Hacienda. Nice to meet you!

As we previously explained, the Spanish entity responsible for collecting taxes in Spain is called la Agencia Tributaria or Hacienda. Self-employed workers will have to pay taxes to this entity every quarter and year during their annual income statement (Declaración de Renta Anual). The tax rate for self-employed workers can go from 19-47 %, depending on the income earned. These rates depend on each region's tax laws and are progressive, in other words, the more money you make, the more money you pay. 

The taxes you'll have to pay will also depend on your business structure: self-employment (autónomo), a Limited Liability Company (Sociedad de Responsabilidad Limitada), a joint partnership (Comunidad de Bienes), or a Private Partnership Agreement (Sociedad Civil). For the most part, partnerships are not taxed at the corporate level.

Let's talk about your Personal Income Tax (IRPF)

Your Personal Income Tax (IRPF or Impuesto sobre la Renta de las Personas Físicas) is a tax that both the employed and self-employed have to pay on what they earn. The IRPF will be quite present in your freelance life: 

  • When you invoice a client 
  • When you declare it on a quarterly basis. 
  • When it’s time to calculate it in your Annual Tax Report (Declaración de Renta Anual)

How to apply IRPF retention when you invoice a client: 

If you are invoicing a client in Spain, you’ll have to include the percentage of IRPF (Impuesto Sobre la Renta de las Personas Físicas) that that customer should withhold in your invoices. This amount for IRPF varies, but the average is 15%. Essentially, this tax amount is deducted from the total amount the customer pays you. This means that your customer withholds the IRPF percentage and then pays it to the tax office by them on your behalf.

How to file IRPF every quarter:

Every quarter self-employed folks should declare their Personal Income Tax (IRPF). What you are declaring here is your income minus your expenses. So when you are filing your quarterly IRPF, you are paying a 20% advance on your income statement. 

To file your Personal Income Tax, you’ll have to turn in Tax Form 130 (Modelo 100) or Tax Form 131 (Modelo 131) every quarter. Later on, these quarterly reports will help you file your annual tax return (Declaración de Renta). 

How to calculate your IRPF in your Annual Tax Report:

The Annual Tax Report (Declaración de Renta) is the document you’ll have to submit to know how much Personal Income Tax (IRPF) to pay that fiscal year. 

Hacienda has established a series of percentages based on the profits you earn as a freelancer to calculate how much you must pay in your Personal Income Tax. If doing math gets you all tangled up.

These are the different IRPF costs depending on how much you earn every year: 
  • If you earned € 0 to €12,450 you’ll have to pay 19% 
  • If you earned €12,450 to €20,200 you’ll have to pay 24% 
  • If you earned €20,200 a €35,200 you’ll have to pay 30%
  • If you earned €35,200 a €60,000 you’ll have to pay 37%
  • If you earned €60,000 a €300,000 you’ll have to pay 45%
  • If you earned €300,000 or more you’ll have to pay 47%

Notice: These fees can change depending on current legislation and the region in Spain you live in.

So... now it's time to discuss your Value Added Tax (IVA):

No, this is not over... You'll have to get very acquainted with your Value Added Tax throughout in your freelance journey. You'll see it when you invoice a client and whenever you purchase a service or product related to your economic activity. Every time you issue an invoice to a client in the European Union, you'll have to include a 21% Spanish VAT (IVA). If you're invoicing a company in the European Union, you don't need to include the VAT fee, just the VAT number.

If your client is foreign, don’t worry, this fee (VAT tax) doesn’t apply to clients outside the European Union or overseas. 

How to file VAT:

Hacienda will want to know how much VAT you’ve invoiced your clients, therefore, every three months you’ll have to turn in Tax Form 303 (Modelo 303). When you file this form, include how much VAT you’ve charged your clients those months. 

How to deduct VAT:

Unless you love paying taxes, you’ll want to deduct as much as you can from these taxes. If you deduct, you’ll pay less taxes (happy dance!).

The formula for VAT deduction could look like this:  (21 % VAT included in invoices) - (the VAT you paid for your self-employed expenses) = The VAT you’ll have to pay Hacienda. 

We'll take a closer look at this later on in: Tax deductions, your greatest allies when cutting down your costs!

How to file your annual VAT:

You should file another fantastic form at the end of the year, called Form 390 (Modelo 390). This form is for your annual VAT declaration. (Declaración de IVA anual). As you fill out this form, you'll get a good summary of all your inbound and outbound VAT transactions. You can do all this online through the Agencia Tributaria site. 

If you provide educational services, arts, and some forms of independent writing, you don't have to file your Value Added Tax Return. But this means that you won't be able to claim any VAT deductions either.

If only we could be this happy when meeting Seguridad Social for the first time!

Hey there, Seguridad Social. Nice to meet you too! 

According to Spanish law firm IppaiLaw, the Social Security system makes sure that you have public health insurance, sick leave, and other social benefits. To get these benefits, you'll need to be registered in the Special Regime for Self-Employed Workers (RETA) and contribute to Social Security through monthly payments. In Spain, these contributions are known as the freelance quota (la cuota de autónomo). Let's learn about the different types of monthly fees and how they depend on your self-employment situation. 

The costs of the self-employed quota:

Your self-employed quota is a monthly contribution that self-employed workers have to pay into the social security system. It's called a quota because it's a fixed amount you pay each month.

If you're 47 and under, you can decide to pay either the minimum or maximum amount for your self-employed quota. The minimum quota for self-employed workers in Spain is €288.98 per month. The maximum percentage for self-employed workers in Spain is €1,221.03 per month. 

If this is the first time you are self-employed, we have great news! If you're registering in RETA for the first time, you'll be entitled to a reduced flat fee of 60 € euros per month. Talk to a legal finance advisor for more information about your specific case. 

We love lists! So here's another one for Social Security quotas for self-employed workers: 
  • For your first 1-12 working self-employed you'll have to pay: €60  per month.
  • After 13 to 18 months, you'll have to pay €144.49 per month.
  • After 19 months to 2 years, you'll have to pay €202.28 per month.
  • After 25 months- 3 years, you'll have to pay €200.28 per month (But this only applies for freelancers under 30 years or women under 35 years)

Tax deductions, your greatest allies when cutting down your costs!

We already talked about the costs of being a freelancer in Spain, but how about the deductions!? Being a freelancer also means spending your own money on supplies and services. However, you can offset some expenses.

When we talk about the VAT Tax, freelancers can deduct all the costs of their activity and business, including 50% of the car/motorbike expenses. So there has never been a better moment to tidy up your receipts. Make sure to save every invoice from these expenses; you'll have to show them as proof to claim these deductions when you file your tax return. 

Here's a list of all of the things and services freelancers can deduct from their Personal Income Tax (IRPF):
  • Expenses on tax and accounting services
  • Social Security Contributions
  • Any payments from your business activity
  • Professional services such as apps, subscriptions
  • Office supplies
  • Any technology used for your job (this can be your cellphone, computer, software)
  • Car expenses. Watch out for this one! You can ONLY deduct vehicle expenses for work. Personal use doesn't count. 
  • The food costs if you need to eat away from home for business. You won't be able to eat a five-course meal at a five-star restaurant, of course. 
  • Other expenses

Let's dream a little!

Our last words:

Financial and legal literacy is key to saving yourself money and trouble being self-employed. After reading our guide, we hope you can better understand the costs of being a freelancer in Spain. 

Unless you're an accounting freak, this might be a little too much to handle! So if you have any doubts or questions, join Corgee's community and ask away. We're here to help you make the best out of this freelance experience.

One last thing!

I hope you found this article helpful. If you’re not a part of the Corgee Freelancer community, it’s not too late. Subscribe here and you’ll never miss useful freelancer tips.

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