The only people who are exempt from paying social security are those that the law recognises as neither employed nor self-employed, in the sense of regularly offering their services asa main occupation. These are people paid for an irregular occasional activity or a one-off event. An example might be an academic on a salary, who is paid for occasional speaking engagements outside the university.
No one earning more than the Spanish minimum wage or Salario Minimo Interprofesional or “SMI” (?9,080 in 2015) can avoid paying social security and it should be noted that:
– if you don’t pay into the system you won’t get the benefits
– the key point is irregular : if you are demonstrably not an occasional autonomo (e.g. you open a shop or office or your service is permanently on offer) it is not possible to claim an exemption however low your income.
Lower rates of autonomo social security
While exemption from social security is very rare, there are some autonomos who pay less than the normal minimum. Some of these situations are as follows:
> Autonomos that are less than 30 years old (men) or 35 years old (women), can receive a discount of 30% on the minimum contribution for the first 30 months.
> Alternatively, new autonomos that have not been registered as autonomo in the past five years (expected to change to two years in 2018) may apply for a discount of 80% for six months, followed by 50% for six months, followed by 30% for six months. For those below the age of 30 (men) or 35 (women) the 30% discount is also extended for a further 12 months. (It is also expected that the initial six month discount will be extended to 12 months in early 2018.)
> Women returning to autonomo following a maternity break are be entitled toa 100% deduction of the minimum social security payment for 12 months.
> People who work “venta ambulante” (literally means peddling, but in reality normally refers to people who work on market stalls and similar) can chose to pay a lower rate of social security.
> There is a also a regime for people who work on their own account in agriculture who pay a specially reduced rate. You have to be registered as such and show you have been working and been paid by official agricultural employers to get this. You cannot just claim to be an agricultural worker by virtue of working on your own land.
Spanish invoice requirements
Autonomos must issue and retain copies of invoices for the work they have done. Additionally, if they want to deduct expenses from income for tax purposes they must hold of a properly constituted receipt. In most cases this will be an invoice (factura).
A proper receipt always has the name of the autonomo or business, the identification number of the business (CIF if a company, or the NIE or DNI of the individual if an autonomo), date, description of product/service, invoice amount and VAT (IVA) applicable.
It is normal when issuing an invoice to put your address as and contact details such as phone number, email address and website. It is also a good idea to put the terms of payment and how the invoice can be settled (for example “bank transfer” with your account details).
Being in English does not invalidate an invoice. But being in Spanish will make things much easier if you should receive a tax office enquiry. Many British businesses in Spain issue dual-language invoices.
IVA (VAT) requirements for autonomos
There are no minimum threshold in Spain for small businesses to not charge IVA. The general rule is that everyone must charge IVA however low their turnover is. However some autonomos only offer goods or services which are exempt from VAT (exento). Examples would be educational or insurance-related supplies, which are often exempt. Also, autonomos who only invoice businesses abroad may not charge IVA to their clients, depending upon various factors (see new VAT rules).
Businesses that provide exempt services don’t have to submit a quarterly IVA return (see below) and they cannot recover IVA on their costs.
To reclaim IVA charged on your costs, proper VAT invoices are a legal requirement (see below).
IVA is reported every quarter using form or “modelo” 303 (plus a modelo 390 at the year end). Just as in the UK, the Spanish tax authorities play it pretty tough when it comes to IVA. When you issue an invoice and charge IVA you are merely collecting the government’s money and must pass it on to them – less any IVA you are entitled to reclaim on allowable expenses – within 20 days of the month end. Late payment of IVA can open you up to severe fines and penalties. The authorities can and will go after your personal assets, including your home, if debts remain unpaid. See Late Reporting Requirements and Penalties here.
IVA rebates for autonomos will be made if the amount of IVA on your expenses exceeds the IVA you have collected on your income. The refund amount is calculated annually not quarterly. So, for example, if you have a lot of expenses in the first quarter of the year and the tax office therefore owes you IVA, you will not get it back at the end of the quarter. Rather, they will accumulate the rebate with subsequent quarters when maybe you will owe them money to offset it. If at the end of the year you are still in deficit and are due a rebate it will be made, but it will take several months to arrive.
IVA on capital purchases like office equipment or a vehicle is reclaimable if the purchase is exclusively for use in the business.
IVA/VAT on crossborder purchases and sales is quite a large and complex topic and the rules for cross-border VAT on services within the EU have changed over recent years (see HM Revenue & Customs guide here). Asa rough rule of thumb you don’t charge VAT on exports of goods and shouldn’t be charged it on imports. In terms of services you will mostly not put VAT on services if the customer is a VAT-registered business in another country in Europe, but you will if the service is provided toa consumer or a non-VAT-registered business. If you buy a service from a European business and have not been charged VAT you may still have to account for IVA on it under the “reverse charge” mechanism. There are special rules for certain types of service like hotels, transport and communications.
This can get rather complicated and you may wish to take advice on your particular situation if you are an autonomo with cross-border transactions.