At the Ministry of Finance this Wednesday, Jesús Gascón, the Minister of State for Finance, spoke about the phase-out of the objective estimation regime, commonly known as the modules, which still applies to many self-employed individuals across sectors such as accommodation, retail, taxis, education, dry cleaning, and hairdressing. He noted a broader debate in Spain about adopting a VAT concession framework similar to many other EU nations. This potential regime would exempt hundreds of thousands of self-employed people and small businesses with annual turnover under 85,000 euros from VAT obligations, provided the European directive’s maximum limit is accepted. Gascón emphasized that the government has not yet decided on the final path, speaking after participating in the 2023 Financial Congress organized by the Lefebvre firm.
He added that discussions about this change were expected to continue in 2023 with a view to implementing any necessary legal adjustments in 2024, so the new rules could take effect in 2025. In that sense, he inadvertently outlined the government’s likely direction: to replace the Module regime with a VAT concession system for eligible self-employed professionals and small enterprises. The aim appears to be a smoother tax regime that aligns with EU guidelines, while still signaling that the ultimate decision rests with the government.
Under a franchised regime, a self-employed person or professional would be allowed to issue VAT invoices, but VAT would not be charged on those invoices. However, input tax would not be deductible under this scheme. There would be no quarterly tax return requirement; instead, a comprehensive annual declaration of operations would be filed. The finance minister clarified that this framework does not constitute a tax exemption for taxis or similar services.
working group at the Institute for Financial Studies
Gascón referred to a working group formed at the Institute for Financial Studies (IEF) that is examining the abolition of the module regime and the introduction of a VAT concession regime in consultation with self-employed organizations and SMEs. He described the discussion as challenging, but essential, noting that the group was created to engage directly with those affected.
The IEF working group includes representatives from the General Directorate of Taxes, the Tax Office, and leaders from organizations such as CEOE, Cepyme, CCOO, ATA, UATAE, and UPTA. The group is reported to be broadly aligned on moving toward a VAT concession regime and achieving a broad consensus to apply the regime to self-employed individuals with annual turnover under 85,000 euros, the threshold permitted by the European VAT directive. This limit, set for 2025, is €85,000 overall or €100,000 for intra-community transactions, according to industry reporting.
Nevertheless, Gascón acknowledged that one of the most sensitive issues will be establishing the precise turnover cap that would qualify a self-employed person or SME for the franchise regime. The aim is to determine whether the concession could proceed within Spain’s simplified regime while abolishing VAT equivalence, as noted by Ricardo Álvarez, Deputy Director General of VAT at the Ministry of Finance.
According to Javier Martín, a professor and lawyer at F&J Martín Abogados, the potential benefits or drawbacks of a franchised VAT regime depend on the activity type. He suggested that if the simplified system does not impose significant VAT quotas, many self-employed individuals could find the regime advantageous. If not, the general regime might be more appropriate on a case-by-case basis. His assessment pointed toward a regime that could prove useful for a broad majority of self-employed professionals.