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

Self-employed in Spain: Seven ways to save money on your income tax return
Photos: Andrea Piacquadio/Pexels
‘Autónomo’ fees in Spain are notoriously high but there are a number of tricks that self-employed workers can use to cut costs in their quarterly tax returns.

If you’re one of the 3.2 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 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.

Tax deduction for pension plans

2021 may be the last year in which private pension plans can be deducted, as suggested by Spain’s Social Security Minister Escrivà in September.

For the time being though, Spanish tax legislation on private pensions allows tax-free annual contributions of up to €10,000 or 30 percent of your earnings, whichever is lowest.

This benefit can result in savings of around €3,600 in annual tax deductions.

If you are over 50, the figure rises to €12,000 or 50 percent of earnings.

The 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 participations 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 organizations 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
 

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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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