VAT exemption for low-income freelancers: what changes and how to apply it

The Government has announced that it will reverse course and implement the so-called franchised VAT for freelancers earning less than €85,000 per year. The decision comes within the framework of negotiations to secure Junts’ support for the anti-crisis Royal Decree-Law, which includes tax cuts to mitigate the effects of the war in Iran.

Junts’ spokesperson in Congress, Míriam Nogueras, confirmed that the measure will allow professionals to eliminate the obligation to charge and file VAT quarterly with the Tax Agency, easing administrative and tax burdens. According to the Association of Self-Employed Workers (ATA), this could mean an average saving of €600 per year per self-employed worker.

What franchised VAT is and why it matters

Franchised VAT is a system proposed by the EU that allows freelancers with income below a certain threshold to be exempt from charging and reporting VAT. Until now, Spain was the only EU country that had not incorporated this exemption into its national legal framework, forcing low-earning freelancers to pay taxes in the same way as large companies.

• Until now, the Government only contemplated exempting intra-community transactions from VAT, without extending the measure to domestic transactions within Spain.
• The European Commission has even taken Spain to the EU Court of Justice for delays in transposing this directive.

With this measure, Spanish freelancers will be on equal footing with other European professionals, reducing bureaucracy and simplifying accounting and tax management.

 

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How the measure will be applied

The Government plans to incorporate the transposition of the directive into a tax bill currently under parliamentary review. This implies that:

• The 0% VAT application will be optional: freelancers will need to apply to opt in.
• The threshold is set at €85,000 per year, although later sector-specific or activity-type thresholds may be established, following models from other European countries.
• The measure will allow low-income freelancers to save time and money on quarterly VAT filings.

Important: opting for this regime also involves a significant limitation. VAT paid on expenses or investments cannot be deducted, meaning VAT paid on purchases becomes a cost for the freelancer.

Practical impact for freelancers and businesses

For a freelancer earning less than €85,000, the elimination of charged VAT means:

• Reduced administrative burden: fewer quarterly filings, lower risk of errors and penalties.
• Direct financial savings: up to €600 per year according to ATA.
• Increased liquidity: VAT not collected is not advanced to the Tax Agency, improving business cash flow.

For SMEs and small businesses working with freelancers, this measure simplifies invoicing and tax calculations, since some suppliers will no longer need to charge VAT on their invoices, which can speed up internal accounting.

Recommendations for freelancers and businesses

1. Review annual turnover: check if you meet the €85,000 threshold to opt for franchised VAT.
2. Plan your accounting: even if filing is no longer required, it is recommended to keep a record of invoices issued and received.
3. Update billing systems: ensure your accounting software allows applying 0% VAT and reflects the changes correctly.
4. Consult a tax advisor: each sector may have nuances, and it is important to adapt your accounting strategy to the final regulations once published.

How we can help

The elimination of VAT for freelancers with income under €85,000 is an important step towards administrative simplification and reduced tax burdens for self-employed workers in Spain.

The Adlanter tax team can help you calculate the impact of this measure on your business, optimize your invoicing, and ensure you meet all legal requirements to opt for franchised VAT.