VAT for Freelancers in Spain: A Step-by-Step Guide

✓ verified by Elena Garro Accounting & Tax Specialist

Like everything in life, being self-employed has its pros and cons, and today we’re going to look at a great example — VAT for freelancers. If the mere mention of VAT (or IVA in Spanish) makes your head spin, just take a second to appreciate how awesome it is to work from home in your PJs. 

Now back to the less fun stuff. As a freelancer, you need to know how to calculate VAT, when to pay it, which forms to use, how to include it in your invoices, and what VAT regime you fall under. 

Or you could just let Xolo handle it for you. We’re like your own personal admin agency, taking care of all things VAT, income tax, and social security. You’ll get a little taste of what our experts can do for you in this article, so let's break it down, shall we?

What even is VAT for freelancers? 

Sure, we know it stands for "value-added tax," but what does that actually mean? Taking a few lessons from the Spanish dictionary, the RAE: 

VAT is "an indirect tax on consumption and the provision of business or professional services, chargeable at each stage of the economic process." 

Basically, VAT is a tax on the goods and services we provide as freelancers, but it’s paid by our clients.

• As an indirect tax, it’s not applied to our income — that would be personal income tax. Your clients pay it to you, and you eventually pass it to the government.
• The consumption and provision of services are what is taxed. In fact, you’ve been paying VAT all your life on pretty much everything, including clothes, subscriptions, and your phone bill.
• As a non-progressive tax, it doesn’t rise depending on the value of your services. However, there are a few different rates, which we’ll look at soon.

Output VAT and input VAT for freelancers in Spain

So, as freelancers, VAT is a pretty big deal for us. Basically, we need to pay attention to both our output VAT and input VAT. 

Never heard these two terms? Don’t worry, we’ll give you an explainer.

Output VAT is the amount of VAT we include on our invoices. For example, if you charge Margot Robbie €100 to take some headshots, you have to add 21% in output VAT to your invoice — €21. 

If the VAT rate is the reduced 10% rate (we’ll get to that soon), then it would be €10 instead. All clear until now?

Input VAT is the VAT we pay on our business expenses. Let’s say you bought a special lens to do Margot's headshots, which cost €10 pre-VAT. Your final bill will include 21% in input VAT, which is… you guessed it… €2.10. A grand total of €12.10.

Margot, on the other hand, will pay you €21 in VAT for your services. It’s both her input VAT and your output VAT. One thing for certain, it’s certainly not your money to spend. 

If you want to calculate your input or output VAT for a quarter or year, it's pretty simple. You only need to subtract the VAT amount from your sales invoices and subtract the VAT amount from your purchase invoices (those eligible for VAT deduction, of course).

What VAT regime do you need to apply as a freelancer in Spain?

Not all freelancers are the same. It all depends on what you do for work and how you're registered with the IAE. Don’t worry about the word “regime” here, it’s just how the Spanish treasury (Hacienda) refers to the different categories of freelancers under its watchful eyes.

General VAT regime

Most of us freelance folks are under the general VAT regime. If you're a designer, programmer, photographer, or community manager, you're probably in the general regime. Basically, you have to file Form 303 with the tax authorities (Agencia Tributaria) every quarter and pay your VAT bill.

Special regime for the equivalence surcharge

The equivalence surcharge regime is for the retail sector. If you're in this regime, you don't have to file Form 303. Yay! 

But here's the catch: you can't deduct VAT on your expenses. Boo!

Freelance activities exempt from VAT

Finally, there are some lucky freelancers whose activities are exempt from it. If you fall into this category, you don't have to file any forms or pay any VAT. But naturally, you can't deduct VAT from your expenses either.

Any activities not subject to VAT are those that literally can’t be. Think sample product exhibitions or free deliveries.

However, the government has decided that other activities are exempt, usually because they have a positive impact on society.

Here’s a brief list of freelance activities exempt from VAT:

• Education and training: So you wanna be a teacher? Well, you're in luck, my friend. As long as you're working in a school approved by the man, you won't have to pay any VAT.
• Health: If you're a vet or you wanna get a boob job, sorry, but you're out of luck. These aren't exempt from VAT. Unfair? Maybe, but that’s the way it is at the moment. Apart from that, all health workers are exempt.
• Social assistance services: Okay, so if you're out there doing good in the world and helping out people in need, you're in the clear. Anything related to social care that isn't all about the money is VAT-free.
• Financial and insurance: Yes, the government considers these professions part of the common good, so they’re exempt from VAT too.

VAT rates for freelancers in Spain

We’ve mentioned different freelance rates a few times throughout this article, and this is where we give you full details. In short, the VAT rate you put on your invoices depends on the line of work you’re in. 

There are three different VAT rates to keep in mind:

• General rate (21%): If your work doesn't fall under any other category and isn't exempt from VAT, it’s a 21% VAT rate for your clients to pay. This rate has been increasing since 1986, rising from 12% to the hefty 21% it is today. 
• Reduced rate (10%): This rate is for the basic stuff like food, hotels, housing, transportation, movies at the cinema (hey, we need to relax too!), and other things that help us get through the day.
• Super-reduced rate (4%): This rate is for the real basic stuff, like bread, veggies, newspapers, books, and medicine. You know, the stuff we really can't live without. 

Form 303: Quarterly VAT filings for freelance hustlers

Now, if you're part of the general VAT regime (which, let's face it, most of us are), you have to deal with the Agencia Tributaria every three months. 

We need to fill out Form 303 to keep the taxman happy. And it’s best not to make him angry. You wouldn’t like him when he’s angry. 

What VAT should we include and what can we deduct as freelancers?

First things first: we need to know what to include in our quarterly VAT payment. It's pretty straightforward — just include all the VAT from your invoices in your quarterly return. Simple, right? 

Now for the deductions. You can only deduct the VAT on expenses that are directly related to your work as a freelancer and that are VAT deductible. So no deducting top-of-the-range serrano ham unless you're really making a business out of it. And trust us, we've seen some weird attempts at deducting random stuff. Don't be that person. 

Filing the famous Form 303 for freelancers in Spain

Once you've got all your VAT sorted, bow down to the Agencia Tributaria and file your quarterly return using Form 303. You can either do it in person (if you're feeling brave or vintage) or online through their website. But be warned — any mistakes or attempts to cheat will not be tolerated. 

So, if you're unsure about anything, ask an expert! 

P.s. we mean us  💁.

Annual VAT return for freelancers: Form 390

Even though VAT is mostly a quarterly thing, there's still some annual work you need to do. 

As a freelancer, you need to file Form 390 every year. It's basically a summary of all your VAT activities from the year, based on the four 303 forms you filed throughout the year. 

A calendar of VAT for freelancers

Good news — the deadlines for filing your VAT forms are pretty much set in stone. So you can plan ahead and mark these dates in your calendar:

Form 303

Your quarterly payments 

• April 1 to 20: First quarter VAT return
• July 1 to 20: Second quarter VAT return
• October 1 to 20: Third quarter VAT return
• January 1 to 30: Fourth quarter VAT return

Form 390

According to the Agencia Tributaria, you need to file your Form 390 “during the first thirty days of January after the year you're reporting on”. 

So basically, file it around the same time as your fourth Form 303 of the year. And that's it!

How to calculate VAT for freelancers?

Despite what you might think, calculating VAT for freelancers is a piece of cake. No complicated formulas or percentages like income tax. All you need is some simple addition and subtraction.

To figure out how much VAT freelancers in Spain owe for the quarter, just follow these steps:

1. Add up all the VAT you've collected from your clients' invoices for the three months. This is the output VAT.
2. Add up all the VAT you've paid on your professional expenses. This is the input VAT.
3. Subtract the input VAT from the output VAT, and voila! That's how much VAT you owe.

Easy peasy, right?

Get that freelance VAT rebate, baby!

Here's some good news. If your forms 303 and/or 390 show you've paid more input VAT than output VAT (and as long as the Agencia Tributaria doesn't find any mistakes in your return), you're eligible for a VAT rebate!

When can you get it? Usually, the refund request can only be made with Q4 303, which is submitted between 1 and 30 January. Just send in your request during that time and you'll get your rebate within 180 days.

Freelance VAT payment deadlines

If you think you have the same period to balance your VAT books when it’s you who owes them money, that’s cute. 

Agencia Tributaria runs the show, so we freelancers have just over a month to pay up what we owe 😩.

As per the Agencia Tributaria’s website, we need to make our quarterly self-assessments from the 1st to the 20th of the month following the settlement period (April, July, October), or between January 1st to January 30th for the last quarter of the year. If the result is to pay, we will be charged in our bank account in the next few days after submission.

At least we get to work at home in our PJs, remember?

Deferring VAT payments

Hey, but don't worry, fellow freelancers. We have a trick up our sleeves! We can ask for a deferral of the payment of VAT to the Treasury, depending on how much we owe:

If we owe less than €30,000, we can defer payment for up to 24 months.

If we owe more than €30,000, we can defer payment for up to 36 months, but we have to give some guarantees of future payment.

What’s the deal with intra-community (EU) VAT for freelancers?

In this globalized world, where the EU is practically one big country (I'm sure many of you have clients from other EU countries), knowing about intra-community VAT is important.

Intra-community VAT is the tax law that governs transactions when we buy or sell goods and services in other EU countries.

There are just two obligations and one outcome of intra-community deals:

• You need to be registered in the ROI (Registry of Intra-Community Operators).
• You need to include the intra-community VAT number on your invoices.

The outcome? Any transactions with clients from other EU countries are exempt from VAT. So, if you're a photographer for an Italian fashion magazine, no VAT for you. 

Xolo: Bossing VAT for freelancers since 2015

VAT for us freelancers isn't as complicated as it may seem. With a little bit of practice, you’ll get the hang of it. But it does take up a lot of time — especially if you want to make some serious savings.

If you'd rather focus on the finer things in life and leave the VAT headache to someone else, sign up with Xolo today! We'll also take care of your income tax and social security payments so you can sleep easy knowing it’s all under control.