The absence of a franchised VAT scheme for self-employed workers with lower incomes It has become one of the major points of contention between the group and the Spanish government. While this system has been in place for years in most European Union countries, in Spain the debate remains stalled behind closed doors.
According to calculations by the National Federation of Associations of Self-Employed Workers (ATA), not applying the VAT exemption This represents millions of euros in costs and lost time for self-employed professionals each year. The organization has presented figures and taken the issue to Brussels, convinced that it is as much a problem of competitiveness as of fiscal equity.
What is VAT franchise and how does it work in Europe?
the so-called VAT franchisee It is a special scheme provided for in EU regulations that allows small businesses to be exempt from the usual value-added tax obligations when they do not exceed a certain annual turnover threshold. In practice, self-employed individuals using this system They do not have to charge, settle or declare VAT in its domestic operations.
This mechanism is aimed at professionals and micro-enterprises with a small turnover, for whom the bureaucratic burden and costs associated with VAT management are particularly burdensome. In exchange for this simplification, They cannot deduct the VAT paid in their expenses, but they gain in administrative simplicity and free up time that they can dedicate to their activity.
Directive (EU) 2020/285, amending Directive 2006/112/EC, allows Member States to set a turnover threshold of up to 85.000 euros per year below which this exemption applies. Each country has set its own limit: some approach the EU maximum, while others have opted for more modest amounts depending on their economic structure.
In countries like France or ItalyThe VAT franchise system is already fully implemented and widely used among self-employed individuals with low turnover. It is also applied in other countries, such as Germany, Portugal, the Czech Republic, and Denmark. different thresholds, which range from figures close to 80.000 euros to significantly lower amounts, in the range of 6.000 or 15.000 euros.
Spain, the only EU country without a franchised VAT system
The key difference, according to ATA, is that Spain is the only one of the Twenty-Seven that has not yet implemented a general VAT exemption scheme based on a turnover threshold. Law 37/1992 on Value Added Tax does not incorporate this concept, even though the European directive established clear deadlines for transposition and implementation.
Brussels stipulated that member states must approve and publish the necessary rules to adapt their legislation before the December 31th 2024 and apply the new regime from the January 1, 2025ATA maintains that, when that date arrives, the Spanish Executive no measures had been taken to introduce this system into the internal order.
The Ministry of Finance, for its part, has argued that the Spanish tax framework already includes special VAT schemes which hinder or limit the full implementation of the franchise as outlined in the directive. It further argues that, in its interpretation, the European regulation does not require the automatic implementation of the exemption for domestic sales, but rather empowers Member States to do so.
In response to this proposal, the self-employed workers' organization believes that the Government's refusal implies a breach of community commitments and an anomaly within the single market, since the rest of the countries have chosen to adapt their legislation to introduce a more or less broad exemption threshold.
How many self-employed workers would benefit in Spain?
The ATA Research Department has estimated the potential impact of implementing franchised VAT in Spain. According to their calculations, around 770.000 freelancers They could benefit from the regime if it were enabled under the same terms as permitted by European regulations.
The analysis is based on two basic criteria that would serve as a filter. On the one hand, professionals with annual income less than 85.000 eurosThe maximum amount set by the EU as the turnover limit to qualify for the exemption. On the other hand, those who bear a VAT volume in your expenses so high that, in practice, it would be more advantageous for them to remain in the general regime in order to be able to deduct it.
According to ATA, this group would be mainly made up of professionals and small businesses Those with lean structures and few deductible VAT-related costs—consultants, trainers, certain personal services, intellectual activities, or small businesses that invoice below the aforementioned threshold—would benefit. For them, administrative simplification would outweigh the possibility of recovering input tax.
Overall, the federation believes that the number of potential beneficiaries would represent a very significant fraction of Spain's self-employed workforce, but would not encompass all of the more than 3,4 million registered self-employed workers. The measure, therefore, would be focused on the lowest billing segments.
Average savings per self-employed person: 660 euros per year
One of the key points of the debate revolves around how much each professional could save in their daily work if the VAT exemption were activated. ATA's calculations point to a Estimated individual savings of 660 euros per year per self-employed individual, resulting from adding up different items related to tax management.
First, the organization quantifies a direct savings in management costs of about 25 euros per month per person, equivalent to 300 euros per yearThis figure includes expenses such as specific software programs for VAT, advisory fees associated with the preparation and submission of periodic returns, as well as other tools necessary to comply with tax obligations.
To that amount is added the value of time spent on administrative tasks related to VAT. ATA estimates that a self-employed professional spends on average around two hours a month to collect invoices and tickets, review documentation, prepare settlements and send them or take them to your accountant.
Taking a conservative cost as a reference 15 euros per hourThose two hours per month represent 360 euros per year This is time that the self-employed worker cannot dedicate to either their work or their rest. Added to the 300 euros in direct expenses, the result is this. potential savings of 660 euros per year for each beneficiary of the franchise scheme.
ATA also warns that these figures are in addition to a broader reality: the federation estimates that all self-employed workers in Spain invest more than 200 hours per year in administrative procedures with the different administrations, which, applied to the same hourly rate, would translate into several thousand euros of indirect cost per person and a strong aggregate impact for the entire group.
Overall harm to the group: more than 500 million euros per year
If the estimated individual savings are extrapolated to the 770.000 freelancers which, according to ATA, could qualify for VAT exemption, the result is a direct economic damage of 508,2 million euros annually resulting from the absence of this regime in Spain.
The organization speaks of “direct, real and quantifiable financial damage” To describe the current situation, since, in his opinion, it is a concrete, measurable, and recurring loss that accumulates year after year unless the regulations are adapted. What is currently estimated at just over 500 million euros will accumulate year after year if the system does not change.
ATA insists that this damage is not a generic estimate, but the sum of unit savings of 660 euros projected onto the entire group of potential beneficiaries. In his view, that figure clearly reflects the disadvantage they find themselves in compared to their European counterparts, who do benefit from the franchise.
The federation emphasizes that many of these professionals operate on tight margins and that any reduction in their administrative costs or in the time spent on paperwork can make the difference between keeping the business afloat, investing in its growth, or giving up on certain activities.
Therefore, the entity considers that the implementation of franchised VAT would be a structural support measure more than a simple technical change in indirect taxation, since it would directly affect the resilience and adaptation capacity of thousands of small businesses.
Impact on State revenue and Treasury position
The other side of the coin is the effect that the VAT exemption would have on public finances. The ATA Research Department estimates that the Implementing the system could cost the State between 625 and 650 million euros annually in terms of uncollected revenue.
The range is calculated based on the fact that the aforementioned 770.000 freelancers They would opt to join the system upon meeting the billing and expense structure requirements. The waiver of the periodic VAT payments that these taxpayers currently make would explain the estimated drop in tax revenue.
This potential impact is one of the main arguments that, according to ATA, is used by Treasury to show reluctance to negotiate the implementation of the regime. The department itself points out that Spain already has several special VAT schemes and that the combination of all of them makes the incorporation of the franchise more complex on the same terms as in other States.
The Treasury also maintains that the EU directive It does not impose automatically The regulation does not mandate the establishment of a VAT exemption for domestic transactions, but rather offers governments the option to do so within certain limits. This interpretation clashes with ATA's view, which considers the spirit of the regulation to be moving towards greater harmonization and simplification for small businesses.
The discussion, in any case, is situated within a broader context of debate on the tax burden on self-employment, the State's revenue needs and the scope to redesign taxes without causing significant budget imbalances.
Competitive disadvantage compared to other EU countries
Beyond purely revenue-generating figures, ATA focuses on the competitive gap which, in his opinion, highlights the lack of a VAT franchise system in Spain. Meanwhile, self-employed workers in countries like France and Italy They benefit from this system and They save millions of euros a year In terms of administrative procedures and burdens, Spaniards are still required to comply with all tax obligations from the first euro invoiced.
The organization points out that professionals covered by the franchised VAT scheme in other states barely present a simplified annual returnThis contrasts with the periodic tax filings and specific accounting required in Spain. This difference translates into less time spent in front of the computer or at the accounting firm and, ultimately, a greater ability to focus on the business.
According to ATA, this situation creates a unequal competition within the single marketThis is especially true in sectors where services can be provided remotely or where there is significant mobility of professionals between countries. Those who operate from a country with more favorable tax policies have an advantage, in his opinion, over those who do so from Spain.
The federation's president, Lorenzo Amor, has stated on several occasions that Spanish self-employed workers are the only ones in the EU who cannot benefit from a VAT franchise system if their turnover is below the €85.000 threshold. In their view, this difference is in addition to others bureaucratic obstacles which they had already been denouncing and which, between tax, labor and social security obligations, consume hundreds of hours a year of the entrepreneurs.
For the group, the problem goes beyond simple cost savings: it's about time, legal certainty and planning capacityThe inability to adopt the same framework as their European counterparts fuels the feeling that they are competing under less favorable conditions within a theoretically integrated space.
ATA's complaint to the European Commission
Given the lack of progress at the national level, ATA decided to raise the issue with European institutions. The federation submitted a proposal in December. formal complaint against the Government of Spain before the European Commission for the lack of transposition and application of the directive relating to the special VAT franchise scheme for the self-employed and small businesses.
The complaint is based on the alleged non-compliance with Directive (EU) 2020/285which amends several articles of Directive 2006/112/EC with the aim of modernizing and harmonizing the tax treatment of small businesses. ATA believes that the failure to adapt Spanish legislation violates principles such as effectiveness of Union law, non-discrimination, proportionality, legal certainty or fair competition.
In its statement, the organization demands that a [system/program/system] be implemented in Spain real regime of simplification and VAT exemption for small businesses, aligned with the system in place in the rest of the EU, so as to reduce administrative burdens and facilitate compliance. In his view, regulatory inaction has a “enormous effect” on business activity and it impairs its competitiveness.
ATA maintains that the lack of action by the Spanish government is not due to an insurmountable technical problem, but rather to a political decision which prioritizes maintaining short-term revenue over tax and bureaucratic relief for small taxpayers. The federation is confident that pressure from Brussels can break the deadlock in a situation that, in its view, has dragged on for far too long.
The European Commission's response will likely determine the next steps in the debate. If Brussels finds that there has been a breach of the directive, infringement proceedings could be initiated, putting further pressure on the government to take action on this matter.
A matter of tax justice and production model
Beyond the numbers, ATA's discourse presents franchised VAT as a tax justice measure and support for an essential pillar of the Spanish economy: the self-employed and small businesses. The federation insists that the lack of adaptation to European regulations is a major issue. It is not a minor matterbut an element that conditions the daily life of hundreds of thousands of businesses.
In its report, the organization describes the situation as “legislative omission” And it speaks of a recurring loss, that is, an economic loss that is repeated and consolidated year after year until the franchise system is adopted. The calculation of annual damages exceeding 500 million euros thus becomes a cumulative figure when viewed in perspective.
For the representatives of the group, easing the administrative burden and simplifying VAT would not only have immediate effects on the finances and time of the self-employed, but could also to promote the formalization of activities, reduce unintentional errors in declarations and contribute to a more conducive environment for entrepreneurship.
Ultimately, the debate opens the door to reflecting on what kind of productive model Spain wants to promote this and to what extent the administration is willing to adapt its tax system to align the reality of small businesses with that of its European partners.
With all these figures on the table, franchised VAT has become one of the major outstanding issues on the Spanish tax agenda: on the one hand, a group that quantifies an average saving of 660 euros per year per self-employed worker and an overall loss of more than 500 million; on the other hand, a State that values an impact on revenue of up to 650 million and that has not yet taken the step to align its regulations with the rest of the European Union.