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Self-employed in Spain: The many ways to save money on your income tax return

‘Autónomo’ fees in Spain are notoriously high but there are a number of expenses that self-employed workers can deduct in order to cut costs in their quarterly tax returns.

autonomo in Spain
Self employed woman in Spain doing her tax return. Photo: stokpic / Pixabay

If you’re one of the 3.3 million ‘autónomos’ (self-employed workers) in Spain, you’re probably more than aware that the country isn’t exactly a haven for self-starters.

Convoluted bureaucracy, the highest flat monthly fees in the EU and meagre state protection and benefits all contribute to the sense that being self-employed in Spain is a costly matter.

Faced with this uphill battle where minimum monthly costs can be roughly €300 (€283 flat fee for seasoned autónomos, plus likely €60 monthly ‘gestor’ fees), self-employed people need to claim back wherever possible.

READ MORE: What does a gestor do in Spain and why you’ll need one

Income tax (IRPF) for autónomos in Spain starts at 19 percent (increasing incrementally depending on salary bracket) and has to be paid every three months.

The following is a list of tax deductions self-employed workers in Spain can claim in either their yearly or quarterly income tax returns.

Tax deduction on economic activity expenses

Spain’s Tax Agency allows the deduction of expenses associated with the economic activity carried out by any self-employed worker.

But for this to happen, it is essential that these expenses are accounted for and justified with invoices and receipts.

Deductible expenses for economic activities in Spain cover a huge range of costs, from regional fees paid to the social security system, to gestor and other advisory fees, office material, maintenance but not renovations, energy bills, training, severance pay paid for dismissals, rental costs of business premises (or if you work from home the amount of the property that serves as office space), health insurance, even restaurant and hotel costs related to work can be declared as an expense if paid for with a card rather than cash.

Talking to your gestor or fiscal adviser about all the potential deductible expenses in your part of Spain is a must if you want to save money.

Tax deductions on food 

If you need to work away from home, you are able to deduct up to €26.67 per day in Spain or €48.08 when you’re abroad. Remember that you need to pay by card and get a proper invoice or receipt, paying by cash will not be accepted. 

Tax deduction on energy bills 

If you work from home and have notified the tax office officially that you are doing so, you can also deduct 30 percent of your water, electricity and gas bills of the proportional part of your home you use for working in.

So for example, if you work in a nine square metre office in your home, you can deduct 30 percent of the energy you use in this one space, not for the whole apartment. In reality, it means that you are usually only deducting €3 or €4 per energy bill, but as they say, every little helps. 

Tax deduction for independent professional services

If they relate to your job, you can also deduct fees from independent professionals such as economists, lawyers, auditors, notaries, as well as commissions from commercial agents or independent mediators. This is in addition to the fees you are charged monthly or quarterly by your gestor. 

Tax deductions on private health insurance

As an autónomo you’re already paying a huge amount every month in social security in order to be able to have public health care access, among other benefits, so you may not want to pay for private health insurance on top of this. 

If you do want to however, the costs of health insurance premiums paid by you or your spouse or partners, as well as children under the age of 25 who live with you, are deductible up to €500 for each individual and €1,500 in the case of disability. 

Tax deduction for owning or renting a home

If you have a home in Spain which you bought before 2013, you can apply for the 15 percent home investment deduction.

In addition, tenants who have a main residence rental contract dated prior to January 1st 2015 can also deduct 10.05 percent of the amounts paid as long as the tax base is less than €24,107 per year. Find out more here.

Regardless of when you bought or rented your home, you can also deduct the proportion of your rent or mortgage expenses, according to the amount of space you use to work in and for home many hours per day. 

Tax deduction for pension plans

In 2021 the Spanish government proposed a new draft law allowing the self-employed to be able to deduct up to €5,750 a year for pension plans. 

While employees will be able to access an annual personal income tax deduction of up to €10,000 with the joint deduction of employment plans (€8,500) and individual plans (€1,500), the self-employed will only have an annual deduction of €5,750.

BBVA bank offers an English-language tax calculator for private pension plans in Spain.

Tax deduction for investment in new companies

Self-employed workers in Spain can deduct 30 percent tax for shares or equity participation in new companies which were bought from September 29th 2013 onwards.

Thus, newly or recently established businesses or companies can deduct 30 percent on these amounts.

The maximum deduction base is €50,000 per year and will be calculated based on the acquisition value of the shares or equity participations bought.

There are a number of conditions and requirements which must be met for the deduction to apply such as it being an officially registered company (PLC, LLC or other), for equity not to surpass €400,000 and for the tax payer to not have a share of the company greater than 40 percent of the capital stock. Find out more here.

ANALYSIS: Why Spain must fix its ‘unfair’ tax system for self-employed workers

Tax deduction for donations and affiliations to political parties and NGOs

Any membership fees and contributions self-employed workers pay to political parties in Spain – as well as federations, coalitions or voting groups- are eligible for a 20 percent tax deduction.

There’s a limit to this rebate of €600 per year.

For donations to non-profit organisations the tax deduction is 75 percent for an amount no higher than €150.

Tax deduction for kindergarten expenses

Since 2018, self-employed mothers in Spain can claim a tax deduction of €1,000 for day care expenses, aside from the €1,200 that working mothers already get.

Registration and tuition expenses as well as food costs can be claimed back, as long as your child is under the age of three.

Regional tax deductions

Spain’s regions have around 200 autonomous deductions relating to personal income tax (IRPF), some of which apply to self-employed workers, including specific ones aimed at struggling autonómos whose businesses have been affected by the coronavirus crisis.

These are far too many to list in this article but Spain’s Agencia Tributaria has categorised them according to each region in the following page
 

READ ALSO: 

Member comments

  1. People think the flat fee is expensive, but that us psychological because you are unsure how much you will make as self-employed.

    In the Netherlands you get a big bill at tax time since you pay an extra percentage for healthcare according to what you made that year on top of income tax. AND everyone has to pay around 90 to 150 euro for the basic healthcare plan that includes a standard deductible of around 400 euro.

  2. People think the flat fee is expensive, but that us psychological because you are unsure how much you will make as self-employed.

    In the Netherlands you get a big bill at tax time since you pay an extra percentage for healthcare according to what you made that year on top of income tax. AND everyone has to pay around 90 to 150 euro for the basic healthcare plan that includes a standard deductible of around 400 euro.

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Q&A: How will Spain’s new social security system for the self-employed work?

The Spanish government announced new tax rates for the self-employed from 2023, but many "autónomos" are confused as to exactly how it will work in practice. Here's what you need to know to understand the new system better.

Q&A: How will Spain's new social security system for the self-employed work?

From 2023 Spain’s autónomos will pay monthly social security fees based on “real earnings” in a similar way to how it works for income tax. The Spanish government revealed the new rates at the end of July 2022. 

The changes mean that rather than there being a fixed minimum contribution base of €294, self-employed workers will pay different monthly amounts based on how much they earn. It will go from €200 a month for lower earners to €590 a month for higher earners.

READ ALSO – CONFIRMED: Spain’s new tax rates for the self-employed from 2023 onwards

However, many of those who are self-employed are confused by the new rules and have many questions regarding exactly how much they’ll be paying from next year. 

Here are some of the most common questions asked and the answers, which are based on an interview with Social Security Minister José Luis Escrivá on radio station Cadena Ser. 

Q: When will the new system come into effect?

A: Autónomos will start paying the new social security quotas from January 1st 2023.

Q: How will I know what income bracket I will be put into?

A: At the beginning of the year, each autónomo will have to state their expected income level using a special tool called ‘importas’ or imports. This will help you calculate how much you might potentially earn during the year. You will be able to modify and change your income bracket six times per year, based on your real earnings. At the end of the year, you will find out what your final real earnings are and your fee will be adjusted accordingly.

READ ALSO: Will you pay more under Spain’s new social security rates for self-employed?

Q: Does that mean I will get my social security back if it turns out Ive paid too much?

A: Yes, essentially like the income tax, you will be paid part of your social security fee back again if it turns out you’ve paid too much. On the other hand, it also means that you will also have to pay more social security if you have paid too little.

Q: How will the new system work if I only work sporadically?

A: As mentioned above, you will be able to change your expected income every two months. This means those with seasonal work will end up paying less in social security fees than they do now, during the months when they get less work. When you begin to earn more, you can change your expected income level again and will be charged more.

Q: What will happen to the tarifa plana or flat rate scheme whereby new autónomos start out paying only €60 per month in social security fees?

A: The tarifa plana as it stands currently will end and those on it will not continue paying the same amount. Instead, new autónomos will pay a flat fee of €80 per month for the first year and will continue at this rate in year two, only if they earn below minimum wage. Low earners, those who earn less than €670 per month will see their rate reduced to €230 in 2023, €225 in 2024 and €200 in 2025.

Q: What will happen if I have to close my business for some reason, do I have to de-register completely?

A: The new law now states that if you are forced close your business partially or temporarily, such as in the case of the volcano eruption in La Palma, you now don’t have to deregister completely from the autónomo system. Those who have to partially close their business will be able to apply for financial help, even if they do not close completely.

Q: Why is there such a big difference between the social security rate in Spain and other European countries?

A: According to Escrivá, Spain is one of the countries with the highest level of protection for self-employed people in Europe. In other countries, you may pay less in social security fees, but will not get pensions, sick pay, maternity or paternity benefits, he explained. It also means you have aid benefits during a crisis such as the Covid-19 pandemic or if you own a shop on a street that has to be closed for construction, for example.

Q: How will we know if the new changes will be successful or not?

A: These reforms essentially mean higher pensions for the self-employed, as well as higher and better benefits. When autónomos start benefitting from these, then we know that it is successful, said Escrivá. 

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