If you work for yourself or have a business in Spain, you must declare and pay certain taxes. In this article, we list the tax obligations for small and medium enterprises and the self-employed in Spain. They include income and business taxes, VAT and payments on behalf of other professionals.
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Income Tax in Spain for SMEs and Self-employed
All small and medium enterprises (SMEs) and self-employed individuals in Spain must declare and pay income tax on their earnings. If you are self-employed in Spain, you declare and pay directly and personally. If you have a company, income tax is paid through it.
Types of tax declaration for self-employed and businesses in Spain
There are two types of quarterly tax declarations:
- The direct estimate (also divided into normal and simplified)
- The objective estimate or modular estimate
You choose one or the other for your activity or business, when you register as self-employed or your company.
Find out how to set up a company in Spain.
Economic Activity Tax in Spain
Spain also applies the Economic Activity Tax (impuesto de actividades económicas/ IAE) and at national, provincial and local level. However, in practice most people and small businesses are exempt from this business tax.
You are not obliged to pay this tax if you are self-employed or your business has a net revenue of below €1 million in the previous tax year.
Value added tax (impuesto sobre el valor añadido/ IVA) applies to the consumption of all goods and services in Spain. As a result, the vast majority of self-employed and businesses charge and pay IVA.
It is applied at one of three rates:
- 21% – general rate
- 10% – reduced rate
- 4% – super-reduced rate
Tax retention and payment
As self-employed or a business in Spain, you will very likely use the services of other professionals. When you do, you’re obliged to retain and pay tax on their behalf. This is done through the invoice in which the professional subtracts the retention (usually 15%) from the amount you are due to pay.
You must pay this retention to the Spanish tax authorities on behalf of the professional. You should do this every quarter and file a report at the end of the tax year.
Get in touch for expert advice
At Costaluz Lawyers we offer help and advice for SMEs and self-employed individuals in Spain. We assist in the setting up of your business and provide tax representation services saving you time, problems and stress.
Get in touch for a free consultation to find out how we can help you do better business in Spain.