We all pay taxes… well, almost all of us. There is practically no one who is free from the long tentacles of the treasury, in any country in the world, with the exception of tax havens. In Spain there is a catalog of encumbrances that reaches us all and everythingFrom winning the lottery to inheriting a house or money. And yes, entrepreneurs too. They have the self-employed personal income tax award.
Remember that taxes are not a modern invention, they have been with us for practically thousands of years.
Visits from tax collectors They are well known to everyone, so much so that even an apostle of Jesus was a tax collector.
Taxes were key in the rise of the Roman Empire, and they have been key in the development of all countries, without them, there would be no way to guarantee a high, dignified quality of life that is achievable for all in a country, via health , education, infrastructure, etc.
That is why it is important that let's all pay taxes, and also, know what taxes we pay.
Today we want to speak to the self-employed, those who support 99% of the Spanish business fabric.
This is a basic guide to understanding the key aspects of personal income tax for the self-employed.
What is the personal income tax for the self-employed?
The personal income tax of the self-employed is the tax that practically all of us pay when we make the income statement. It is the Personal Income Tax, hence its acronym, IRPF.
It is a tax that only people pay, not being able to be subject to this tax any moral company, that is, companies, organizations, etc.
It is a tax that is paid through withholdings, the main objects of withholdings being self-employed or employed workers.
Withholdings are advances to the treasury in the form of money, to the Tax Agency, in anticipation or advance for the result that will be obtained in the following income statement.
They are regulated by the Law and are dictated by different percentages, according to a series of aspects, which we will see in this article, and they are mandatory.
The balance of the withholdings is paid, to use, by the payers: the companies that pay the payroll, the tenants, the clients or the bank.
At the end of the period, a balance is made between the real income tax vs. The advance income tax, and the difference is calculated, which can be paid or returned.
Personal income tax is the tax that generates the most money for the coffers of the Spanish State, Keep in mind that all workers, around 17 million, and all the self-employed, who are 99% of the companies that exist in Spain, are subject to personal income tax. Any variation in this tax affects almost the entire country, and it is the tax that generates the most debate in these debates to the Presidency of the Government, and that there will be.
If you are not self-employed, Maybe you should check in your payroll how much to pay to the Tax Agency, and investigate if it is a lot or a little, and the consequences it has for you. If you are self-employed, keep reading.
Characteristics of the personal income tax of the self-employed
Well, we already know what personal income tax is, who it affects and a little about how it works, based on withholdings. Now it is time to understand its nature a little.
These are the characteristics of the personal income tax of the self-employed, but also of employed workers:
A. It is a progressive tax, that is, by sections: whoever generates more money, pays more for personal income tax
B. Personal income tax is levied on the universal income of the self-employed person, that is, national and international transactions, in order to always avoid double taxation
C. It is a periodic tax that coincides with the calendar year, although its accrual or payment is made in months after its end
D. Personal income tax covers the entire calendar year, that is, from January 1 to December 31
E. Part of the control and collection is in charge of the Autonomous Communities. That is why there are Communities that lower this tax, and others raise it, for example
How much is the personal income tax of the self-employed
We all know more or less how much we pay in taxes. For example, VAT, the second tax, is 21% and we all assume its cost in any purchase or payment of services, in the supermarket, or when someone repairs something at home, such as a washing machine.
But the self-employed have it somewhat more difficult than the others.
Why? The personal income tax of the self-employed and in general, changes every year, and due to its progressive nature, the sections and their percentages can also create confusion.
To avoid confusion, we will avoid references to previous years and will stick to the amounts published more recently by the Government chaired by Mariano Rajoy.
The smallest tranche, which is that of low income, is 15%.
What does it mean? That of all the money that a self-employed person bills, 15% must be withheld and paid to the Tax Agency.
Although if you have never been autonomous, and you are new, You can take advantage of the 7% fee, or the so-called 'flat rate' in which you pay € 50 per month.
From here, the sections increase, and the more money you generate, the more money you will have to send to the Tax Agency.
A point to be highlighted is that 15% is the same as before the crisis, having reached 22%.
Who should pay the personal income tax of the self-employed
Not all are subject to personal income tax withholdings.
Really the only ones that should do it are:
to. Self-employed professionals, that is, those who are registered in the Economic Activities Tax, in the second and third sections
b. Some activities in objective estimation, or modules
c. Pig fattening and poultry farming activities
d. Agricultural activities and other livestock activities
and. Forestry activities
If you are a new self-employed person, we advise you to go to an agency with experts who can tell you which branch you belong to, and if you have the obligation to withhold personal income tax on invoices, and how much is the percentage to retain, since it is different in each of the activities that we have mentioned above.
Things you should know about personal income tax withholdings
Well, we have not commented on it, but we suppose that it has already been clear that personal income tax works based on progressive withholdings directly on invoices, since it is a tax paid by customers, not the company.
But you should know that withholdings have some things that you should know, without getting carried away by what people say, since each professional activity has its own withholding amounts.
In general, this you should know about withholdings:
to. Invoices to individuals should not carry personal income tax withholding, only those that are issued to other self-employed workers, since individuals do not submit statements to the Treasury for withholdings.
b. If you are a self-employed professional, and more than 70% of your invoices carry personal income tax withholding, you are exempt from your quarterly income tax return
c. Payments are made directly to the Tax Agency or Treasury
d. Some companies that invoice professional freelancers, take care of everything, but you must be clear that it is the obligation of the self-employed to carry out all the administrative work
What withholdings affect the personal income tax of the self-employed
Well, we already know that the payment is made from quarterly form, with the withholding that the self-employed make on their invoices issued to other self-employed, and that after the annual balance, it may be to be paid or returned.
But What types of withholdings are there? There are three types that affect the self-employed and that they are obliged to do.
Here you have them:
I. The deductions that must be made directly on each invoice issued, and according to their activity, can be from 1% to 15%, depending on, we insist, the branch of activity of the professional. If your activity is in the first section of the Tax on Economic Activities, you are not obliged to make any withholding for personal income tax, for example
II. If in your work as a freelance professional you hire people, you are obliged to practice retention of them, according to certain characteristics such as their activity, number of children and other circumstances that change the percentage that you must withhold from their payroll
III. If the self-employed professional has his business in a rented premises or business, he must retain 19% for personal income tax
If you rent, you have one or more workers and you are a self-employed professional, you must make three types of withholdings per quarter, So the best thing you can do is resort to some software that manages that, or an agency, remember that a mistake can earn you a fine, in the best of cases.
How to pay the personal income tax of the self-employed
Thanks to changes in the law, The payment and declaration of personal income tax is made electronically, that is to say from home. We advise you to do so, informing you about it. We only tell you that it is necessary that you have your DNIe or digital certificate.