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Date Published: 20/11/2024

VAT for self-employed workers in Spain will NOT be scrapped, Treasury confirms

It was hoped that autónomos in Spain earning less than 85k would be VAT-exempt from 2025

Self-employed workers in Spain had a brief moment to rejoice earlier this week when several media outlets reported that from 2025, autónomos earning less than 85,000 euros would be exempt from Charging VAT.

However, on Wednesday November 20, the Spanish Treasury categorically denied these rumours, stating in no uncertain terms that little progress has been made in negotiations. Furthermore, the Ministry of Finance and the National Federation of Associations of Self-Employed Workers (ATA) have stressed no VAT exemption regime will come into force in Spain in January 2025.

In truth, Spain is the only EU country that enforces a VAT franchise system for autónomos, and the government has been coming under increasing pressure from Brussels to scrap this rule and make life a bit easier for the over-burdened self-employed. But negotiations regarding this tax reform have been paralysed for more than a year, with no sign of any resolution coming soon.

With the fake news gaining traction online, the president of the National Federation of Self-Employed Workers' Associations (ATA), Lorenzo Amor, was forced to respond with a post on social media: "As much as we wanted it and as much as we were negotiating... It is not true that in 2025 self-employed workers with incomes below €85,000 will stop paying VAT. Erroneous news is appearing on this matter."

Following the President's message, some of these media outlets have retracted and corrected these errors, but many others have not yet done so.

Por mucho que lo quisiéramos y así estuvimos negociando….
No es cierto que en 2025 los autónomos con ingresos inferiores a 85.000€ dejaran de presentar el IVA
Están apareciendo noticias erróneas sobre esta materia
— Lorenzo Amor (@lorenzoamor_ata) November 18, 2024

According to sources close to the negotiations for the VAT franchise regime, "the discussion is still at a standstill and, for the moment, the implementation of the regime in Spain is not planned."

A few months ago, the Treasury did actually promise to exempt self-employed workers with a turnover of less than 85,000 euros from paying VAT, but then it retracted and said that it would only apply it to international operations.

Where has the confusion come from?

According to the Tax Agency, the incorrect news was published by one media outlet and quickly picked up by dozens more, and it spread like wildfire. But there are some changes coming next year, and this could be where the confusion stemmed from.

In January, a new European Directive (2020/285) will come into effect, but only a small group of self-employed workers will benefit. Specifically, those who work with other freelancers from European countries that have a special tax exemption.

If a Spanish business works with a client or supplier from a country with a VAT exemption, they won't have to pay VAT on those invoices. However, this exemption only applies to those specific invoices with clients or suppliers from those countries, not to their operations within Spain.

Let’s say, for example, a Spanish freelancer works with a client from Germany, which has a VAT exemption. The Spanish autónomo won't have to pay VAT on the invoice to the German client. However, they will still have to pay VAT on their other invoices with Spanish clients.

The key point here is that the exemption will only apply to operations with countries that have a VAT exemption, not to operations within Spain. Spanish self-employed workers will still have to follow Spanish tax rules for their domestic operations.

With regard to the VAT exemption for autónomos, things are sadly at a standstill for the moment.

As the president of ATA pointed out, "Spain is the only country in the European Union where self-employed workers do not have a VAT exemption. We are the only country that has not transposed the European directive."

For this reason, Lorenzo Amor assured, ATA "will continue to demand" that this exemption from declaring VAT be applied to self-employed workers who carry out operations in Spain and invoice less than 85,000 euros.

Unfortunately, this is still a long way from being achieved.

In other news: Guide to applying for DANA aid for individuals, self-employed workers and businesses

Image: Freepik

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