Spain's Franchised VAT Scheme: Key Changes for Freelancers Starting 2025

Significant changes are ahead in Spain regarding the modernization and simplification of tax compliance for self-employed workers. One of the most important changes in this process is the implementation of the Franchised VAT Scheme, under which freelancers and other self-employed workers will have to report and pay VAT under new rules.

Impact of the Franchised VAT Scheme

Starting in 2025, freelancers whose annual turnover is below EUR 85,000 will be able to benefit from a new tax regime called IVA Franquiciado, which stands for Franchised VAT Scheme. The scheme was created in accordance with EU Directive 2020/285 and aims to reduce administrative burdens on freelancers and other self-employed workers. In addition to the EUR 80,000 threshold, another threshold of EUR 100,000 is defined for those engaged in intra-EU transactions.

Freelancers and businesses eligible for this scheme will no longer submit quarterly VAT returns and include VAT on invoices. In essence, this means less administrative work and a reduced possibility of being penalized for late submission of VAT returns. Moreover, the fact that VAT will no longer be calculated on most invoices also means that they can lower the cost of their services for their clients.

Of course, there are some downsides to this. For example, freelancers and other businesses subject to these rules can no longer reclaim VAT on business expenses.

Conclusion

Freelance work has become widely popular in recent years, and new rules show that Spain is monitoring this industry and self-employed workers in general. Although the laws and regulations are defined to meet the needs of freelancers and similar businesses, it is crucial to see how those affected by these changes will adapt.

Also, freelancers and self-employed workers should prepare for adjustments in how errors are corrected under new rectified self-assessments and how cross-border transactions are managed.

Source: Euro Weekly News