Spain to Exempt Low-Earning Self-Employed from VAT by 2025

Madrid, Spain – Self-employed individuals in Spain earning less than 85,000 euros annually may soon see a significant change in their tax obligations regarding Value Added Tax (VAT). A new European directive, Directive 2020/285, which came into effect in February 2020, is set to be transposed into Spanish law by January 1, 2025, at the latest. This directive will allow eligible self-employed workers to opt out of including VAT on their invoices and, consequently, will exempt them from declaring it to the tax authorities. Currently, self-employed individuals issuing a 1,000-euro invoice must pay approximately 210 euros (21% VAT) to the tax agency. Under the new regime, these individuals would directly receive the full 1,000 euros without the VAT component. However, this change also implies that self-employed individuals will no longer be able to deduct VAT from their business purchases. Experts note that this is a logical consequence, as the ability to deduct VAT is tied to its collection and declaration. Further details on the implementation of this new regulation are expected as the 2025 deadline approaches.

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