Spain’s low-income self-employed may no longer need to add VAT to invoices

Spain’s government has signalled plans to introduce a VAT exemption for self-employed workers earning under the proposed threshold of €85,000 a year, in line with existing European Union legislation. The proposed change affects a significant proportion of autónomos, including many foreign residents running small businesses. The policy shift follows ongoing parliamentary negotiations and pressure from Brussels for Spain to implement an EU directive that has yet to be fully transposed into national law.

The policy shift comes amid ongoing parliamentary negotiations, particularly with regional parties whose support is needed for broader legislative measures. It also follows pressure from Brussels for Spain to implement an EU directive that has yet to be fully transposed into national law. If enacted, the exemption could simplify tax obligations, reduce administrative paperwork, and make it easier for small businesses to operate efficiently.

How the VAT exemption will work

The reform would allow autónomos below the proposed €85,000 annual turnover threshold to stop charging IVA (VAT) on most of their services. This would simplify tax obligations by removing the need to submit quarterly VAT returns and reducing administrative paperwork.

The measure is based on EU Directive 2020/285, which permits member states to exempt small businesses from VAT to reduce administrative burdens. Spain has not yet implemented this option, despite it being allowed under EU law.

Government sources confirm the change was signalled during negotiations with parliamentary partners, particularly regional parties whose support is needed for broader legislative measures. The exemption has not yet been formally approved, and no official start date has been confirmed, but implementation is expected to follow the adoption of the necessary legal framework.

Impact on self-employed workers across Spain

If implemented, the change would have noticeable effects nationwide, especially in regions with high numbers of freelancers and foreign residents.

throughout Spain, many residents operate in sectors such as tourism, property, and online services. Not charging VAT could reduce administrative costs and simplify invoicing for these small businesses.

In Málaga and Alicante, where autónomos often serve international clients, the exemption could make services more competitive, particularly for those working cross-border.

Under the current system, self-employed workers must:

• Charge VAT, typically 21%, on most services 
• Submit quarterly VAT returns 
• Maintain detailed invoices and financial records 

The proposed system would reduce these obligations for qualifying autónomos. However, affected workers would no longer be able to reclaim VAT on business expenses, which could offset some of the financial benefit depending on the type of business.

Local tax advisers have reported increased enquiries from clients seeking clarification on how the threshold would be applied and whether participation would be automatic or optional.

Practical steps for self-employed residents

Until the reform is formally enacted, autónomos should continue operating under the current VAT system. Preparatory steps include:

• Check your annual turnover to see if it falls below €85,000 
• Consult a gestor or tax adviser for guidance on whether the exemption would benefit your business 
• Review business expenses to assess the impact of losing the ability to reclaim VAT 
• Monitor official announcements from the Spanish government and Agencia Tributaria 
• Do not change invoices yet, as VAT must continue to be applied until the law is approved 

Comparison with current rules

The proposed VAT reform simplifies the system for autónomos with earnings below €85,000:

• VAT on invoices
  • Current system: mandatory on most services 
  • Proposed system: not required for those under €85,000 turnover 
• VAT returns
  • Current system: quarterly filings required 
  • Proposed system: likely exempt for qualifying autónomos 
• VAT on business expenses
  • Current system: reclaimable 
  • Proposed system: not reclaimable 
• Administrative burden
  • Current system: high due to invoicing and reporting requirements 
  • Proposed system: reduced, with less paperwork for small businesses 

While the change would ease administrative obligations, it is not a direct tax cut. Some autónomos may pay less tax overall, while others may simply benefit from reduced reporting requirements.

Common questions

Will existing autónomos be included?
Yes. The measure is expected to apply to current self-employed workers with income below the threshold, although details on whether participation will be automatic or optional remain unclear.

Will the exemption apply across Spain?
Yes. VAT is regulated nationally, so any change would apply in all regions, including Andalusia, Valencia, and Madrid.

What if annual earnings exceed €85,000?
Autónomos exceeding the threshold would likely return to the standard VAT system, resuming invoicing and reporting obligations, though transition rules are yet to be confirmed.

Next steps for implementation

The government is expected to introduce formal legislation to implement the VAT exemption once parliamentary negotiations conclude. Further guidance will clarify eligibility, administrative procedures, and whether autónomos may choose to remain within the standard VAT system.

Self-employed residents, particularly foreign nationals unfamiliar with Spain’s tax system, should treat the announcement as a pending policy change rather than an active law. Tax offices and professional advisers will update procedures once the exemption is formally approved.

Additional details are likely in the coming weeks as the measure progresses through Spain’s legislative process.