If you want start as a freelancer,and thus be able to offer your services on your own to all types of companies or individuals in a collaborative way, in this post we will tell you what to do to start your journey as a freelancer, and what taxes you must pay to comply with the law, and contribute to Social Security.
Should you register as a freelancer to start as a freelancer?
If you are willing to start as a freelancer, with the idea that your services offered to companies and individuals correspond to 100% of your income obtained with your daily or usual activity, you will be obliged to register as a freelancer.
That said, if you have never been registered as a self-employed worker before, or more than two years have passed without being registered (three if you have already been a beneficiary), you can take advantage of the flat rate of 60 euros per month for new self-employed in 2019.
This flat rate will allow you to pay a limited monthly fee to Social Security for the first 12 months. The following 6 months will apply a reduction of 50% of the total quota, while from 18 to 24 months, you will enjoy a reduction of 30%.
eye! If you choose a base other than the minimum, during the first 12 months, you will have a bonus of 80% on the minimum contribution base, but not on the basis you have chosen.
After two years from your registration in the RETA, you must pay the total of the self-employed fee, which in 2019 is located at 283.3 euros per month.
How to register as a freelancer?
To register as self-employed you will have to present form 037 or 036 in the Treasury,to make the census declaration. When filling in these forms you will have to include all your personal data, the type of work activity you are going to carry out, as well as the location in which you are going to develop the activity.
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You must declare your work activity through the Economic Activities Tax (IAE), also selecting it through forms 037 or 036, where all the business activities that can be carried out in Spain will appear.
Once this is done, you will be registered in the Treasury and in a position to invoice with your own NIF, as well as to pay those taxes linked to your income.
But you still will not be able to contribute to the Social Security, since for this you must register by presenting the form TA0521 in the General Treasury of the Social Security, together with a photocopy of the DNI and another of the registration in the Treasury. The deadline for registering must be prior.
Once you have completed both procedures, you will already be considered by the state as a self-employed worker, being able to start as a freelancer legally.
Quarterly VAT return for freelancers
When working as a freelancer in Spain, and once you are registered as a self-employed worker, you must make a quarterly VAT declaration corresponding to the income obtained. You will also have to make an annual return, along with the return for the fourth and final quarter of the year.
That said, when issuing invoices as a freelancer to your clients for your services, you must apply 21% VAT to the tax base,which you will then have to pay to the Treasury through the quarterly declaration.
Likewise, if you have offered your services to a company or professional, you must also apply the corresponding personal income tax withholding,which will be subtracted from the tax base, not counting 21% of the VAT.
This means that you will be paying your Personal Income Tax with each invoice issued, and at the end of the year, when you make the Income Tax return,you will be informing the Treasury of your net benefits, as well as what you have already settled as Personal Income Tax.
What personal income tax should you apply to your bills?
The personal income tax withholding that you will have to apply on your invoices will vary depending on the type of work activity you develop:
- If you are registered in the first IAE heading, you will be free to withhold Personal Income Tax on your invoices.
- If you are registered in professional or artistic activities, you must retain 15% of Personal Income Tax on each invoice issued.
- If you are in your first two years as a freelancer, you can retain 7% of Personal Income Tax on your bills.
- If you are registered in activities in objective estimation by modules, you must apply a 1% withholding of Personal Income Tax.
- If you are engaged in agricultural, forestry or livestock activities, you will have to apply a personal income tax withholding of 2%.
- The retention for livestock activities of pig fattening and poultry farming will be 1%.
Can you work as a freelancer without being self-employed?
If you already work for a company, you can offer your services as a freelancer without having to register as a freelancer,since you will already be contributing to the Social Security.
Of course, the condition for not registering as a self-employed worker is that your services offered to third parties are punctual, and do not exceed the Minimum Interprofessional Wage.
On the other hand, even if you were hired by a company, if you offer your services as a freelancer on a regular basis, obtaining an income higher than the SMI, you will be in the obligation to register as a freelancer, fulfilling all the corresponding obligations.
If you want to start as a freelancer, carrying out your work activity on your own and offering your services to third parties, you will be obliged to register as a freelancer, paying the corresponding amount of taxes, as well as the monthly self-employed fee.
If you have any questions about it, our tax advisors will be happy to advise you and offer you all the information you need.