Regardless of where you're based, you have to deal with Spanish VAT regulations if you have clients in Spain. VAT, or Value Added Tax, is a consumption tax levied on the purchase of almost all goods and services in the EU. While you might already know that, you might be unaware of the specific rules surrounding your product, which you should follow if you want to stay tax compliant.
Check this guide to going freelance first if you haven't registered to be an Autónomo. For registered freelancers, the standard VAT rate in Spain is 21%, with reduced rates of 9%, 6%, and 0% applied based on the products you sell. The Spanish VAT law is dictated within the General Tax Code and is administered by the Agencia de Administración Tributaria. If you're a freelancer looking to learn more about how VAT works in Spain, keep scrolling!
What are the different VAT rates in Spain? The Spanish government levies four different VAT rates, and freelancers must charge the amount that applies to their products and services.
Although there is no applicable VAT on zero rated products, you should record sales of goods and services and create a report based on your returns.
Like other businesses, all freelancers in Spain must pay VAT, irrespective of annual turnover. Although, some goods and services such as educational services, assistance to individuals by medical and health professionals, artistic endeavors, and some forms of independent writing are exempt.
When to register for VAT
You have to pay VAT every January. Additionally, you need to report your VAT every quarter (January, April, July, and October) using the Modelo 303 form. In January, you must summarize your VAT declarations for the whole year in the Modelo 390 form. All of this can be done online through the Agencia de Administración Tributaria.
If you provide exempt services, you don't have to file for VAT returns, and you cannot reclaim VAT on your costs.
How to Register for VAT in Spain
First you have to register as a freelancer, or aútonomo, with the tax authorities. If you're an expat or resident, you must also apply for the Número de Identificación de Extranjero (NIE), or Foreigner's Identification number. Then, to pay your freelance taxes, including VAT, you'll need to submit the registration tax form Modelo 037.
Like a formal business, freelancers, too, must pay 21% VAT, regardless of their annual net income. You must use Modelo 303 to submit your quarterly VAT reports and Modelo 390 to submit your yearly VAT declarations.
All of this can be completed online through the Agencia de Administración Tributaria webpage.
Another option is to use the Mini One-Stop Shop (MOSS) system, which allows you to consolidate all of your EU VAT in one single tax return. This system is optional but beneficial if you have customers in multiple countries, including Spain, within the EU. MOSS allows you to avoid registering in each Member State of consumption. Even if you're outside the EU, you can register with MOSS in Spain or any other EU country. To learn more, click here.
Alternatively, you can hire an accountant (or agency) to handle your VAT returns and dealings with the tax office. Xolo provides services like Xolo Go and Xolo Leap, which help with precisely this and any other VAT concerns you may have.
Registering for VAT is only the first step. From the day of your registration's effective date, you must:
Furthermore, every VAT-registered individual is required to:
If you opt to use the Mini One-Stop Shop (MOSS) services, you must maintain your VAT records for at least six to ten years. These records can be stored electronically, on paper, or in a software application. Your records should be precise, readable, complete, and simple to comprehend. As a freelancer, you must maintain a record of the following things:
Getting overwhelmed? At Xolo, we can help you to future-proof these vital documents by automatically generating, storing, and maintaining them electronically in our servers for as long as you need them.
With Xolo Go, you can easily freelance and invoice your clients, even without a registered company or LLC.
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Simply put, we do the hefty work for you so that you can enjoy the freedom of freelancing. So connect with us immediately, and we'll help you get your one-person business up and running in Spain in no time!