The self-employed world is still in the process of digesting the changes to the contribution system while it is already preparing another profound transformation with respect to taxation. Since January, self-employed workers have begun to contribute to Social Security based on income, a change that will be made gradually until 2025, and pending new negotiations in the coming years.
Now, what will change, predictably from 2025, is taxation. This is a radical simplification, removing the obligation to submit the VAT return quarterly, as long as the self-employed person’s turnover is less than 85,000 euros per year. It will move to a franchise regime that will eliminate the current modules and equivalence surcharge regimes.
There is still no formal proposal from the Treasury on the reform, but the consensus that has been reached on the main points makes it possible to anticipate its implementation in the coming years. This consensus includes self-employed associations, unions and employers, as well as experts from the State Tax Administration Agency, the General Directorate of Taxes and the Institute of Fiscal Studies.
“It’s about improving the situation of the obligations from the point of view of simplification”, says Eduardo Abad, general secretary of the UPTA, who points out that the new system will be mainly aimed at “the taxi, the small package store, the small shops , some restaurants with few tables and bars with limited capacity”.
The great advantage of this franchise regime is the simplification, avoiding the cumbersome procedures that must be completed punctually every quarter for small freelancers, those who invoice below the threshold. Each self-employed person will have to do the calculations and decide whether to accept the new system, with less bureaucracy, but in which he will not be able to deduct expenses; or continue with the quarterly VAT declaration, and apply VAT to customers and deduct what you have had to pay. There is the option to choose, and the decision may depend on the level of expenses to which you have undergone and which, therefore, may also relieve.
The most benefited may be those who need little purchase of materials and reduced external services, that is, those who have few expenses, such as the case of the liberal professions. In addition, those who sell the product or services to individuals will not need to pass on the VAT. There may be more than 800,000 self-employed people in total who can be accommodated in the franchise regime.
Everything indicates that a single threshold will be established for all self-employed sectors, this limit of 85,000 euros, the maximum foreseen by the European directive of 2020 that promotes this modification, although on the part of the Uatae and CC.OO . it is requested to set separate limits by sectors. The majority thesis, however, is a single threshold, because it avoids complexities and facilitates easier application and control. In addition, if this limit is set at a high level, as planned, it will allow a large number of freelancers to join the franchise.
An open element of discussion is whether, in order to prevent the implementation of the franchise regime from encouraging fraud, for example, not to exceed the exemption threshold, specific control measures are needed or the current one is enough regulatory framework. Some self-employed groups, such as Uatae, are calling for “a specific anti-abuse protocol”, but no decision has yet been made.
This simplification must be combined with the provision of the necessary information to the tax administration, which is planned to be achieved with the presentation of the census return, the invoicing and registration obligations, and the register books of the VAT and personal income tax. In this area, the self-employed associations insist that this information must be submitted only once a year to simplify the process as much as possible.
The franchise regime will replace both the simplified VAT regime and the equivalence surcharge. The simplified regime was created at the time to guarantee the effective taxation of the SME group and, despite the provisional vocation, the years pass and it remains in force. In this case, the VAT settlement is calculated based on fixed economic amounts, the modules, which are established by the Treasury according to the economic activity carried out.
The consensus report between self-employed associations, employers, trade unions and tax authorities describes it as an outdated regime, currently without justification and not responding to criteria of economic capacity.
Although everyone agrees to abolish it, there is not so much consensus regarding the deadlines. Where the Uatae and CC.OO. they propose its immediate abolition, the UPTA and the ATA prefer a gradual abolition, and point, in the case of the ATA association, to a transition period of three years.
