Know how series... Autonomo tax and social security costs!
One of the main criticisms of the autonomo system is that all autonomos, regardless of the their income, are required to join the social security system under the Special Regime for Autonomous Workers ("RETA"). Anyone earning more than the Spanish minimum wage or Salario Minimo Interprofesional or "SMI" has to pay social security at a set level, although this may change in 2019
Currently the monthly cost to a self-employed person will be at least 275 euros per month.
Lower rates of autonomo social security
There are some autonomos who pay less than the normal minimum. Some of these situations are as follows:
- New autonomos that have not been registered as autonomo in the past two years may apply for a discount of 80% for six months, followed by 50% for six months, then 30% for six months. For those younger autonomos, (below the age of 30 (men) or 35 (women)) the 30% discount is also extended for a further 12 months. Autonomos that are less than 30 years old (men) or 35 years old (women), can receive a discount of 30% on the minimum contribution for the first 30 months.
- Women returning to autonomo following their maternity leave are entitled to a 100% deduction of the minimum social security payment for 12 months.
- People who work "venta ambulante" (refers to people who work on market stalls or similar) can choose to pay a lower rate of social security.
- In addition, there is also a reduced payment rate for people who work in agriculture. You have to be registered as such and show you have been working and been paid by official agricultural employers to get this. You cannot just claim to be an agricultural worker by virtue of working on your own land.
Retenciones or retentions of income
As an autonomo when you invoice another Spanish autonomo or business for your services then you must save a tax retention of a percentage of the invoice value to pay to the Agencia Tributaria as advance income tax. (NOTE There is no retention if you are invoicing a private individual, a business outside Spain, or if you are a trading autónomo (empresario individual).
In 2018, the retention rate is 19% for EU/EEA residents if the country of residence of the recipient exchanges tax information with Spain (24% for non-residents). The rate is reduced to 7% for the first two calendar years of business. For women under 35 and men under 30, the reduction continues for the first three years. The withheld amounts are credited to your tax bill. If you deregister from the system (dar de baja como autónomo) you lose the reduction benefit for two years.
Note that these retained amounts are not lost to the autonomo. They are credited when the income tax quarterly returns are made: 20% of an autonomo's net income for the quarter must be paid to the Agencia Tributaria but credit is given for retentions incurred.
VAT/IVA
You have to pay 21% IVA (Impuesto sobre el Valor Añadido) or VAT however low your annual turnover is, although some goods and services, such as educational services, are exempt.
You have to pay VAT every January, but have to report your VAT every quarter and also complete an annual IVA (VAT) declaration or Modelo 390, which you can do online through the Agencia Tributaria. If you provide exempt services, you don’t have to submit a VAT return and you cannot reclaim VAT on your own costs.
VAT within the EU
You may be exempt for paying VAT on goods and services if you are dealing with business customers (ie. VAT registered) outside of Spain but within the EU, as they pay the VAT at their country’s rate at their end. If you intend on doing this, you need to register this with the Agencia Tributaria to receive a special tax number, and will need to make quarterly declarations about your ‘intra-community’ business. As of January 2018, if you are selling digital services to consumers within the EU, you now have to charge VAT at the rate of your customer’s country.
Further information can be found at the following sites:
https://www.expatica.com/new/es/finance/taxes/freelance-taxes-471615/