7 changes on taxes for freelance workers

7 changes on taxes for freelance workers

Self-employees (currently 21% of Spanish working population) will face some changes related to their income tax this year:

1. Amortization:

Freelance workers can deduct this year up to 50% of their expenses related to their business activity as long as they may be able to justify such expenses.

2. Credit terms for debt payments

Previously, a freelance worker could defer or split payments of tax debts under 18.000 €. The new law indicates that they can ask for splitting a debt under 30.000 € without adding any extra guarantees.

It is noticeable too that the interest rate for tax debts lows from 4,375% to 3,75%.

3. Changes on tax-evaluation systems: 

The new law reduces the circumstances under which freelance workers can determine their income tax through an objective-estimation system.  For this reason, many of them will have to move to a direct-estimation system from now on. Under the direct-estimation system, the top of incomes is lowered from 450.000 € to 250.000, and the top of expenses is lowered from 300.000 € to 250.000 €.

4. Changes for civil law companies:

Until now, civil law companies were allowed to pay taxes under the Income Tax. From now on, any corporation developing business activities must pay under the Corporate Tax.  If the partners of a company decide that they not to be subjected to the Corporate Tax, they must extinguish the company within the next 6 months.  In that period, a specific tax system will be applied.

5. Wages of working-partners:

In 2016, any partners receiving incomes from activities performed in benefit of the company must be accordingly registered in the Social Security System as contributors. On the other hand, the contribution of administrators and board members in Social Security System is reduced from 37% to 35%.

 6. Being a freelance worker while receiving unemployment benefits:

One of the most notable changes is the reform of The Improvement of Self-Employment Act, which came into force at the end of 2015. This new law permits to receive unemployment benefits while being registered as self-employee for a maximum of 9 months.

The recent tax reform allows to unemployed workers to be registered as freelance workers as well

7. Payment of Income Taxes according to expense and benefits:

New self-employees entering the RETA (Spanish acronym for Special System for Freelance Workers) for the first time will apply in their invoices a tax withholding of 7% for the first three years of their activity.  They can also benefit from a 20% deduction on the output of their business activity.

 More information is available in the Tax obligations schedule of 2016.

 “Choose a job you love, and you will never have to work a day in your life.” Confucius 

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