Module mode
Self-employed professionals earning up to 85,000 euros per year will have the option to adopt a new VAT concession regime that could exempt them from tax liability. VAT would be included in invoices, and quarterly statements would be simplified to reflect tax once it is published. This measure has already been thoroughly discussed among representatives of the Ministry of Finance. The Tax Administration has engaged with business groups including CEOE, Cepyme, CCOO, ATA, UATAE and UPTA, joining a working group formed at the end of August with the Institute of Financial Studies and other advisers. Those discussions have been shared with El Periódico de Catalunya, via the Prensa Ibérica network.
It is estimated that more than one million self-employed workers bill below the 85,000 euro threshold, but the new optional regime may not suit every business. Depending on the sector, invoicing with VAT and declaring the tax could be more advantageous. The reform traces back to a European directive slated to take effect in 2025, and the working group is debating how and to whom the new regime will be applied in Spain.
Module mode overview
The working group was created to advance a legislative amendment and outline a calendar for implementing the new tax regime for self-employed individuals and small and medium-sized enterprises. The proposal report, drafted by the General Directorate of Taxes, also contemplates the final elimination of the current regime used for the objective estimation of personal income tax. The plan, currently phased in over three years, targets around 355,000 taxpayers in sectors such as hotels, retail, transportation, education, and personal services whose annual income does not exceed 250,000 euros. Agriculture, forestry, and similar activities are not expected to be included in the initial module regime.
In Navarra, since 2021 the local treasury eliminated the objective estimation regime for personal income tax and introduced a direct estimation system for self-employed professionals with annual turnover under 150,000 euros, with higher thresholds in agriculture and related sectors.
Plans for 2024 or 2025
The self-employed mixed working group within the Treasury aims to publish its recommendations in April, with a six-month window set for the group’s work. Some representatives believe the discussions will pave the way for legislative changes starting in April, potentially allowing early application for the VAT concession regime by January 2024. The regime would exempt natural persons with turnover up to 85,000 euros, or 100,000 euros if intra-EU operations are included, from tax obligations. The Ministry of Finance stresses that the directive from the European Union, which features the VAT concession already used in most EU nations except Spain, will not fully take effect before 2025. It is also important to note that consulting findings in the report carry advisory weight and do not bind the government.
The General Manager of AEAT, Rosa Prieto, noted during a discussion on taxation at an Entrepreneurs and Self-Employed Forum that there was broad agreement within the group to pursue the VAT concession regime. The Treasury is actively engaging with self-employed associations to implement a regime that would relieve small businesses from filing quarterly VAT returns. Prieto suggested this system could reduce anxiety around tax compliance and simplify the path to ending the modular regime for personal income tax.
Who benefits?
The point about eligibility up to 85,000 euros was clarified by Prieto rather than an explicit list of conditions. Celia Ferrero, vice president of the Self-Employed Workers Association, noted the threshold of 85,000 euros and 100,000 euros for intra-community operations as reported in a summary document later seen by El Periódico de Catalunya.
Among those participating in the discussion table, many see a concessionary VAT regime as a way to reduce administrative duties. Attendees included Rosa Prieto, Navarra’s finance minister Apple Saiz, a deputy economy official, and professors and lawyers from local firms. Under the concessionary regime, self-employed individuals would no longer file quarterly tax returns, but they would submit a comprehensive annual declaration detailing all activities.
According to Professor Javier Martín, the advantages depend on activity type. If a business has little VAT to reclaim, the franchise regime could be highly appealing because it minimizes tax impact and deductions. Conversely, a business with substantial VAT to offset might find the regime less attractive. The regime is expected to be beneficial for many, though outcomes will vary by sector and activity.
In summary, the VAT concession would simplify compliance for many self-employed workers by removing quarterly VAT filings while introducing an annual consolidated report. This aligns with broader efforts to streamline personal income tax treatment and reduce burdens for small operators.