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Tax Deductions in Spain For The Self Employed

Tax deductions in Spain for the self-employed can provide a great opportunity to save money and create a more stable income. Freelance Tax deductions are available on the cost of materials, tools, and maintenance expenses for self-employed or independent workers. Tax deductions may also include other professional costs such as training, exhibitions, and conferences – all of which could provide an invaluable resource for self-employed individuals in Spain.

This is an absolute must-read if you want to become a freelancer in Spain. Without a doubt, the taxes that come with self-employment are one of the most crucial aspects to consider as part of your choice. Read on!

What are tax deductions for self-employed?

In Spain, two taxes offer deductions to self-employed workers: the Personal Income Tax (IRPF) and the Value Added Tax (IVA). Those who take advantage of these tax reductions can greatly reduce costs.

Personal income tax is a progressive tax levied on the income of individuals. Employed workers are taken off their payroll each month. In the case of the self-employed, they must withhold a small amount on each invoice they issue. Both employed and self-employed workers have to make the annual income statement to balance the amounts. IVA is a direct tax that taxes consumption and is added to the amount of each item or service for sale.

tax deductions in Spain for the self employed

Income tax or IRPF (“Impuesto de la Renta de las Personas Físicas”)

Almost every quarter, self-employed people must pay the Spanish tax agency (Agencia Tributaria) for personal income taxes. This tax is known as IRPF or personal income tax by the Spanish tax authority. As a freelancer, you’ll be dealing with the IRPF on a regular basis:

  • when invoicing clients
  • setting aside for quarterly payments
  • calculating your annual tax report

Thus, if you file your quarterly tax return, 20% of it should be submitted as an advance payment. You must complete 130 (Modelo 100) and 131 (Modelo 130) forms, and this preliminary report will make preparing the annual tax return easier.

How to file IRPF quarterly

Every 3 months, self-employed individuals must submit their Personal Income Tax (IRPF). This declaration includes your income decreased by any relevant expenses. If you’re a freelancer living in Spain for more than 183 days each year, then you will become known as a tax resident. As such, all income generated from any self-employed activities must be declared and taxed accordingly.

Consequently, when filling out the quarterly IRPF documents you are essentially paying a 20% prepayment in anticipation of your income statement. To file your Personal Income Tax, you’ll have to turn in Tax Form 130 (Modelo 100) or Tax Form 131 (Modelo 131) every quarter. Later on, these quarterly reports will help you file your annual tax return (Declaración de Renta).

How to calculate IRPF in the Annual Tax Report

It depends on several factors, such as your economic situation and the type of activity that you pursue. In general, tax rates range from 19% to 47%.

  • From 0 to 12.450€: 19%
  • From 12.450€ to 20.200€: 24%
  • From 20.200€ to 35.200€: 30%
  • From 35.200 to 60.000€: 37%
  • From 60.000€ to 300.000€: 45%
  • Above 300.000€: 47%

Depending on the specifics of your circumstances, you may use additional allowances to reduce what you owe in terms of the base rate.

How to apply IRPF retention when invoicing a client

When voicing clients in Spain, the percentages of IRPF that the customer has to remit will also be included on your client’s invoices. IRPF’s annual costs vary, though the average is 15% deducted from all the fees paid by the client. Your customers withhold IRPF percentages and pay them back to the Tax Office in your name.

VAT for self-employed workers (“IVA”)

Once each quarter (between the first 20 days of each quarter, on January, April, July, and October), you file and pay your quarter VAT at the local tax office. In Spain, VAT is 21%, and you will apply that extra rate to the different invoice services you send to your clients.

How to file VAT

In order to file your VAT, you must fill out and submit a Modelo 303 form. This document is mandatory for all self-employed workers that have to pay social security contributions or freelance tax (Autónomos).

When filing this form, you must provide evidence of the expenses incurred, such as food expenses, maintenance costs or professional fees.

During each quarter, each invoice you send will include an extra 21% on your prices. For each business-related invoice you received and for all those invoices for work-related products you have purchased (like a new phone or computer), you will pay that 21%.

At the end of the quarter, you must sum up all VATs you received, subtract VATs paid, and the difference is what you must pay to the Tax Agency. You will do that using Model 303.

You may be exempt from paying this tax if you deal with business customers outside Spain (but within the E.U.) and are VAT registered.

How to deduct VAT

For instance, if you’re a computer programmer and purchase software, computers, or ergonomic chairs, they’ll be tax deductible. If you submit an invoice for non-business items like a refrigerator or table set with six chairs, unfortunately, it won’t pass silently but will qualify should your business specialize in hospitality services.

How to file your annual VAT

At the end of each year, you must also submit Model 390, including a summary of all VAT transactions throughout the year. Completing this annual VAT declaration form will provide you with a comprehensive overview of all your incoming and outgoing VAT transactions. You can do it quickly and conveniently online through the Agencia Tributaria website. However, if you deliver educational services, artworks, or specific types of freelance writing, then filing your Value Added Tax Return is not required – but that also means no tax deductions for those activities.

Which are the expenses you can deduct?

But now comes the good news: what you can deduct and all those concepts that will help you save money. That is because, on your income tax declarations, you can deduct several invoices you have been paying throughout the year to lower the final tax base.

You can get a tax credit in Spain if you have paid freelance or self-employment taxes. In most situations, a deductible item should be credited to the yearly return. If not, you cannot file a tax deduction. As business owners, you can claim deprecated assets on your company property.

What exactly is deductible?

  • Your monthly social security contributions
  • Any type of expense related to sustaining your freelance activity
  • Tax and accounting invoices you paid
  • Any tool or service that works as a subscription base that you use for your working operations
  • Your health insurance monthly payment (up to 500€)
  • Utilities like your phone and internet invoices
  • Supplies, like your office
  • Vehicles, in case those have been used for your freelance activity
  • Tax services maintenance expenses

Important note:

For all deductions to be applicable, you must prove the corresponding expenditures through formal invoices, in which your name, address, and tax identification number must appear.

Tax deductions in Spain for the self employed

How to file freelance tax in Spain

After filing a tax return with the tax authorities, your earnings must be reported at least three times per year. You declare your earnings from October to December and pay 20% of your tax. This is a Model 131 form, and it is required for every employer to submit a request. Every self-employed person must use model 132 for their freelance income tax in Spain. Each year, you will do your yearly income tax declaration, which uses model 100 and contains all the incomes you received and taxes you paid during the previous year.

Options to file tax returns

There are two different options to file tax returns: online with the Spanish tax authority (Agencia Tributaria) or through a personal visit to your local Tax Office. In either case, you must provide all personal information, income, taxes paid, and deducted expenses in the annual income statement.

Additionally, there are extra tax declarations that you may need to submit depending on your personal situation and business activities. For instance, If 70% or more of your clients make tax withholdings on your fees, on each invoice, you send to your clients, you can choose to subtract from the total a standard 15% income tax, or a reduced 7%. Then, once you do your annual income tax declaration, and according to how much you have generated during the year and after subtracting all the different allowances and bonification, you will pay (or receive) the difference.

But there is also another alternative. Using Model 130, you would quarterly pay, in advance, a 20% income tax for all the incomes you declare quarterly (without subtracting the 15 or 7% on each invoice). But, if you use a modular system called “estimación objetiva”, you would use model 131 instead, and your income levels will be based on estimations rather than actual income.

A word from SublimeSpain

From the look of it, taxes for a self-employed worker in Spain are quite favorable given all the deductions available to qualified individuals.

Being a freelancer means spending your money on supplies and services. However, you can offset some expenses against your personal income tax, social security contributions, and freelance tax deductions. Knowing which items are eligible for these deductions is key to maximizing the amount of money you save in taxes each year. Additionally, knowing the fundamentals of finance and law is essential in order to maximize your savings while being self-employed.

After studying our guide, we strongly believe you have a better comprehension of what it costs to be an independent contractor in Spain. Even if this information may appear overwhelming at first glance, do not worry; SublimeSpain has got your back. We are here to assist you to make the most out of your freelance experience by providing any support or answers that you need.

Disclaimer: Information on this page may be incomplete or outdated. Under no circumstances should the information listed be considered professional legal or financial advice. We highly recommend seeking guidance from a legal or financial expert if you lack extensive knowledge or experience dealing with any of the procedures outlined in these articles.

Wealth Tax in Spain in 2025: What Do You Need to Know

The Spanish wealth tax, or ‘Impuesto sobre el Patrimonio,’ is an annual tax placed on wealthier individuals and families in Spain. While this form of taxation doesn’t necessarily apply to most people, it can significantly impact those with substantial wealth and even deter many from ever moving to this beautiful country. However, strategic and careful planning coupled with professional guidance will help you reduce your wealth tax liability and, ultimately, fulfill your ambitions of living in Spain.

Residency considerations related to wealth tax

An essential distinction in Spain related to the wealth tax is between residents and non-residents. At the same time, both residents and non-residents need to pay wealth tax. In general, non-residents will have to pay less than residents.

You are a resident in Spain for tax purposes if you spend more than 183 days per year in Spain (6 months). On the other side, only spending 182 days or fewer in the country will classify you as a non-resident for tax purposes in Spain. In this way, having a residency permit does not automatically make you a tax resident in Spain.

Get taxes done more quickly and efficiently with our tax services in Spain

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Non-residents in Spain and wealth tax

If you’re living in Spain as a non-resident for tax purposes, you’ll only be taxed on your assets within the country that is valued at over €700,000. This means that if all the rest of your possessions are located outside of Spain, they are not subject to wealth tax. Situations, where you will be a non-resident and have to pay wealth tax, are:

  • When you are a married couple, you can claim an allowance of €1,400,000 against all included joint assets.
  • If you inherit wealth above €700,000 from Spain, you will have to pay inheritance tax, and you will have to start paying wealth tax.
  • In general, when you have a double nationality, you will not have to pay wealth tax over all your assets when you are located abroad for more than 183 days of the year.

Exemptions for non-resident wealth tax in Spain

For non-residents, there is only an individual deduction of €700,000 on the Spanish wealth tax.

Residents in Spain and Wealth tax

If you are living in Spain as a resident for tax purposes, you will be taxed on your worldwide assets that are valued at over €700.000. This means that on top of your assets located in Spain, the value of all your assets will be included for wealth taxation purposes in Spain, which can lead to a significant overall tax increase. Situations where you will have to start paying wealth tax as a tax resident are:

Exemptions for tax residents in Spain

There is a range of exemptions, and you can also claim a personal tax-free allowance that varies based on the region you live. Some exemptions include:

  • Individual deductions on the national level are €700,000. However, autonomous regions can have a different rate. For example, the deduction in Catalonia is only €500,000.
  • Married couples are entitled to individual deductions on their share of the main home owned, provided joint name ownership.
  • You can get an allowance of up to €300,000 against the value of your primary home.

Therefore, in some cases, the homeownership and individual deductions combined allow married couples to have a total tax-free allowance of up to €2,000,000.

Bear in mind that tax treaties may be enacted with other countries if taxed elsewhere. For example, double taxation treaties are in place with the United States, Canada, and various countries throughout Europe.

Wealth Tax in Spain

Exact percentages of wealth tax in Spain

Wealth tax in Spain is a progressive tax in Spain. The more value your assets have, the more you will pay. The different autonomous regions have various wealth taxes in place, and some don’t have any. In general, wealth tax in Spain is between 0.2% and 2.5%. Below is more information.

The national progressive wealth tax is:

The national wealth tax in Spain is for non-residents and residents who reside in an autonomous region that has not set a wealth tax rate. Wealth tax rates for non-residents have increased since previous years and range anywhere between 0.2% and 3.5%. The top percentage bracket starts at around 10 million euros.Rates and wealth tax in Spain for 2025

 

The autonomous regions have different wealth tax between:

Spanish residents are taxed based on their fiscal residency location within the country. While the percentages listed for non-residents are also the national standard for residents, some Spanish Autonomous Regions have set their percentages and tax brackets.

Wealth tax in Spain by regions

Wealth tax in Spain by regions

Avoiding wealth tax in Spain

There are ways you might be able to “avoid” Spanish wealth tax. However, they do come with some caution. They need to be correctly and legally executed for the assets to be exempt.

1. Bonds for Life Assurance

When the policyholder of the life assurance bonds, has waived his right to redemption, and an irrevocable beneficiary has been named. The policyholder can’t exercise the right of redemption.

When the policyholder can’t access the assets, it’s not part of its assets, and therefore, they don’t have to pay wealth tax. According to Spanish courts, the minimum period of waiving rights through the policy is three years (V2516-17, V3070-17, V0993-18).

2. Pensions

In Spain, pensions and their assets are not subject to wealth tax. The person receiving the pension can’t use it, so it’s not considered part of their assets.

3. Shareholding

Shareholders in companies with the following characteristics:

  • The firm is a trading business.
  • There is ownership of at least 5% of the company’s share capital or 20%, excluding shares held by a spouse or other family members.
  • You manage the firm’s operations.
  • You receive a wage for these jobs at least half of your total net earnings.

4. Giving money away

By giving money away, you can take it out of your estate. Often it is given to children or grandchildren to avoid estate taxation.

5. Share money between your spouse

When you transfer assets to your spouse, you can take them out of your estate.

6. Other potentially exempt assets

Household effects, businesses meeting certain standards, intellectual property rights, and business assets that are used for the taxpayer’s major source of income are all examples of special classes that could be considered exemptions.

Of course, you should always seek expert advice before taking significant steps like those mentioned above. Always keep in mind that the rules of taxation change over time, so make sure you check them frequently.

Wealth tax Spain

Key assets included in the Spanish Wealth tax

There is a range of specified inclusions to the Spanish wealth tax. While there may be some things that require special clarification. These are the essential items to consider that are covered under the Spanish wealth tax:

  • Real estate properties
  • Artwork and antiquities
  • Vehicles, boats, planes, etc.
  • Insurances, deposits, and temporary income
  • Luxury items – e.g. expensive jewellery, expensive coats, racing cars

Key assets exempted from the wealth tax in Spain

  • Primary home in Spain (up to 300,000 EURO)
  • General household contents (except any items listed above)
  • Pension rights
  • A range of small business assets and family company holdings

Other deductibles include any loans taken out on the condition that they weren’t used to invest in any of the assets considered exempt from the wealth tax.

Wealth tax and the 60% Rule

Spanish residents have a rule that stipulates an individual’s cumulative wealth and income tax cannot exceed 60% of their total taxable income.

So wealth tax + income tax cannot be higher than 60% of your taxable income.

For example, if an individual has a taxable income of 100,000 Euros (savings or general), then their wealth tax + income tax cannot exceed 60,000 Euros.

However, it’s essential to remember that you must pay a 20% minimum of the total original wealth tax calculation. So you will never be fully exempt from wealth tax. In this way, it is wise to take as little income as possible.

The payment of the wealth tax

Provided you have any wealth tax liabilities, you’re required to complete the wealth tax forms at the end of each year (31st of December), with the final amount payable between May and June.

It is also determined if you are a non-resident or resident.

For married couples considering filing joint income tax returns, you’ll need to calculate your wealth tax on an individual basis and then add it together with your total income tax due as a couple.

 

Tax rates

Professional advisory on wealth tax

Need assistance with Spanish taxation? Reach out to our team of Spanish wealth tax experts for relevant guidance, meticulous planning, and filing management. We will handle your case strictly confidential and get you a second opinion. You can contact us at contact@SublimeSpain.com.

At SublimeSpain, we’ll work closely with you to provide a custom service specifically based on your needs. Not only do we have a wealth of experience with tax strategies and tax planning solutions, but we also have a verified track record navigating the legal and tax system for expatriates and foreign investors.

Disclaimer: Information on this page may be incomplete or outdated. Under no circumstances should the information listed be considered professional legal advice. We highly recommend seeking guidance from a legal expert if you lack extensive knowledge or experience dealing with any of the procedures outlined in these articles.

Get taxes done more quickly and efficiently with our tax services in Spain

Learn more

IRPF Spain: How to calculate Personal Income Tax

Are you an expat or a self-employed individual living in Spain? Are you wondering how the Personal Income Tax (IRPF in Spain) works and what you need to do to accurately calculate it? This can be a confusing area of tax understanding for many expats moving abroad. However, in this article we will break down concisely all the information needed about IRPF so that you can confidently know exactly what your obligations are, and how to stay on top of them each fiscal year.

What is IRPF?

IRPF (Impuesto sobre la Renta de las Personas Físicas) is the personal income tax in Spain. It is a direct tax that is applied to the income earned by individuals who are residents of Spain. The IRPF tax rate in Spain is progressive. This means that the more income an individual earns, the higher percentage of tax they will pay. Tax rates for different income brackets range from 9% to 52%.

IRPF in Spain

How does IRPF work in Spain?

The income tax is designed to levy taxes on almost all the income an individual earns. This includes salaries, public pensions, investments, gambling winnings, rental income, and insurance payouts.

The tax authorities categorize this income to differentiate between earned income and savings income. Earned income is subject to general rates, while savings income is subject to specific brackets and scales.

Who pays IRPF in Spain?

Residents in Spain have to pay personal income tax (IRPF) on any income obtained in the country or worldwide. This includes employment income, rental income, capital gains, and other forms of personal income. IRPF is also due on foreign-sourced income if the individual is a Spanish tax resident. Non-residents in Spain must only pay personal income tax on any Spanish-sourced income obtained, such as rental income from a property in Spain.

Individuals earning more than € 22,000.00 a year

The personal income tax rate for individuals earning more than € 22,000.00 annually is progressive from 23% to 45%. There is also an additional surcharge of 3% on any taxable base above € 150,000.00. Individuals earning less than € 22,000.00 a year are subject to the personal income tax rate of 19%, which applies regardless of how much income is earned within the taxable base.

Non-Residence

If you are a non-resident in Spain and have income sourced in Spain, you may be subject to Spanish tax laws and required to pay Spanish income tax. The Spanish tax system requires non-residents to pay taxes on income earned in Spain. This includes employment income, rental income, capital gains, and other types of income. The tax rates for non-residents vary depending on the type of income earned and the country of residence.

You must file a tax return with the Spanish tax authorities to determine your tax liability. The tax return should include all income earned in Spain during the tax year and any deductions or credits you may be entitled to. Failing to pay this tax will result in charges and penalties from the Spanish Tax Agency should you decide to sell your property. This tax must be paid yearly, from January 1st through December 31st of every year for the past year’s taxes.

Spanish Resident

If you are a Spanish resident, you will be taxed for your worldwide income. The personal income tax in Spain is progressive. It starts at 0% for those earning up to € 12,450.00 per year, and goes up to a maximum of 45% for individuals earning more than € 22,000.00 a year. In addition to personal income tax, individuals may be subject to other taxes, such as wealth and capital gains. Wealth tax is a direct personal income tax on the net worth of individuals, while capital gains tax is imposed on any profits derived from the sale of an asset.

In order to avoid double taxation, Spain has signed double taxation agreements with more than 90 countries worldwide. If you have paid taxes in another country and your home country has signed a double taxation agreement with Spain, you may be eligible for a tax credit or refund on the Spanish income tax you paid. When there is no treaty between your homeland and Spain, you can take advantage of foreign tax deductions and any foreign compensation. Your Spanish Lawyer will be able to work out these amounts for you.

You are expected to submit your personal income tax return to the Spanish Tax Agency (Agencia Tributaria) before December 31st each year, covering all income earned from January 1st to December 31st of the previous year. Non-residents who spend more than 183 days in Spain are deemed residents for taxation purposes, regardless of whether they have secured a residence permit or not.

How much tax do you pay in Spain?

To determine the amount of IRPF tax an individual must pay, they must first calculate their taxable income. This includes income from employment, self-employment, investments, and other sources. Certain deductions and allowances are also available to reduce taxable income, such as expenses related to work, contributions to pension plans, and some family-related deductions. You must keep in mind that the exact amount due will depend on your region. To provide an estimate of what to expect, here are the income tax bands that the Spanish government state for 2023:

  • From 0 to 12,450 euros: 9.5% state rate and autonomous rate, or 19% total rate.
  • From 12,450 euros to 20,200 euros: 12% state rate and regional rate, i.e. 24% total rate.
  • From 20,200 euros to 35,200 euros: 15% state rate and regional rate, or 30% total rate.
  • From 35,200 euros to 60,000 euros: 18.5% state and regional rate, or 37% total rate.
  • From 60,000 euros to 300,000 euros: a 22.5% state and regional rate, or 45% of the total rate.
  • Over 300,000 euros: 24.5% state rate and 22.5% regional rate, or 47% total rate.

In Spain, everyone has a non-taxable personal allowance. How much this is will depend on your circumstances, and further allowances depend on your family, marital status, or several dependents.

Notice that to calculate IRPF in Spain, the Tax Agency offers you a free and simple program on its website.

Filing your Spanish tax return

All tax residents must file a Spanish annual return known as the Declaración de la Renta. During May and June, every individual must file their own income tax return.

In order to file your Spanish personal income tax return you will need to present all of your personal information. This includes your name and date of birth, personal tax identification number (NIF), a valid Spanish address, any personal income earned over the past year, and proof of residence. You must also provide information about any taxable capital gains from investments or property sales and details regarding rental income and employment income earned.

Once you have submitted your personal income tax return, the Spanish Tax Agency (Agencia Tributaria) will review it and may require additional information or documents before levying any personal income tax. The agency then has up to four months to send a notification of taxation. The notification outlines the total personal income taxes due for the year. From there, you can make arrangements to pay any personal income taxes due directly to the Spanish Tax Agency.

As a Spanish resident, you must submit a tax return and pay income tax at a progressive scale rate determined by your autonomous community.

IRPF in Spain

A word from SublimeSpain

To sum up, Spanish citizens need to understand how their income is taxed and how this tax is calculated. Knowing the IRPF Spain tax system allows expats living in Spain to benefit from understanding their obligations and allowances when filing a Spanish income tax return. Nobody wants to pay more taxes than necessary – understanding how to calculate taxes will help you optimize your finances. Furthermore, speaking with a qualified financial consultant during the preparation period of your IRPF declaration, can easily avoid confusion, incorrect representation of facts, or double taxation.

Taxation is inherently complex. In addition, the IRPF is one of the most complicated taxes to calculate, if not the most. This is the reason why it is convenient to have professional help and advice. SublimeSpain has developed a wealth of expertise in the rule of law and accounting in Spain. We offer expert services in all aspects of Spanish law, for individuals and businesses. We will guide you through the process of establishing your company in Spain and provide prompt responses to any queries you may have. Contact us today!

Disclaimer: Information on this page may be incomplete or outdated. Under no circumstances should the information listed be considered professional legal or financial advice. We highly recommend seeking guidance from a legal or financial expert if you lack extensive knowledge or experience dealing with any of the procedures outlined in these articles.