Blog

More and more freelancers are dedicated to teaching languages and working with platforms such as Italki, developing their activity with students from all over the world. This type of platform has transformed the teaching and learning of different languages. You have to register, find a teacher, and start learning!

This possibility of finding customers at the click of a button has meant that many private language teachers have opened their horizons, significantly improving their income.

But any improvement usually implies some resignation. In this case, it has meant that many private teachers, who went from house to house taking out their euros regardless of other obligations, have considered regularizing their situation by registering with the Treasury and Social Security. 

Receiving money in their bank accounts, once they download it from Paypal or other platforms, is an undeniable indication of income in case of tax checks.

And since we have received many inquiries from freelancers who are in this situation, we have decided to make a compilation and relate them in this article.

1. Do I have to register with the Treasury and Social Security?

Whenever you carry out an economic activity and teach languages is, you must register with the Treasury and Social Security. And that will always be our advice.

Despite our advice, there are indeed different situations related to the obligation to register or not in Social Security. In another article later we will analyze all possible situations.

2. In which section do I have to register with the Treasury?

The most common one used for language teachers is 826: Teaching Personnel of Various Education, such as Physical Education and Sports, Languages […], and the like. This activity is considered professional. For that reason, it is included in the second section of Royal Legislative Decree 1175/1990 of the Tax on Economic Activities.

3. How much will I have to pay for Social Security payments?

That will depend on whether it is your first self-employment registration or not. These are the figures for 2020:

– First registration or you have been out of the RETA for more than two years.

– From month 1 to 12: € 60.00 / month

– From month 13 to 18: € 143.07 / month

– From month 19 to 24: € 200.30 / month

– If you do not meet the above requirements, the minimum fee is € 286.15 / month.

4. What taxes will I have to pay?

You will only have to pay income tax since the language training activity is exempt from VAT. In other words, you will not have to submit a form 303 or an annual VAT summary (form 390).

As it is a professional activity, it is subject to withholding. So if you invoice Spanish companies or freelancers, your invoices will be withheld. In this way, you will not have to present form 130 of quarterly income tax. If you want to dig a little deeper into withholdings and Model 130, check out this other article.

But if you work almost exclusively for Italki, you will have to present form 130 quarterly. That means to enter 20% of your net income (income less expenses) each quarter.

5. What expenses can I include in my activity?

Well, you can include all those expenses that you incur and that are related to the achievement of income, from improvement courses, applications that you need to use for the exercise of your activity, the expenses of your website, training or study materials, commissions of platforms such as Italki, and more.

If you have doubts about any specific expense, I advise you to discuss it with your advisor. They can guide you on its deductibility and on the best way to justify it.

6. I work from home, what can I deduct?

Suppose you are an online teacher and you use a room for the exercise of your activity. In that case, you can deduct the expenses of your home supplies, such as water, gas, electricity, telephone and Internet.

Of course, they will be deductible only in the percentage resulting from applying 30 per cent to the existing proportion between the square meters of the room used for the activity to the total surface of the house, unless a higher or lower percentage is proven.

But if you do numbers, you will see that the result of applying 30% to the proportional part of the house used for the activity can be very low. With an example you will see it more clearly:

An online teacher who works from home has a room of 18 m2 for the exercise of his activity. His house has an area of 90 m2. Therefore, the percentage of the surface that he designates to his activity is 20%.

What operation will he have to carry out to find out what to deduct from a telephone and Internet bill that amounts to € 145.00?

€ 145.00 x 20% (percentage of m2) = € 29.00 x 30% (percentage established by the standard) = € 8.70

IMPORTANT NOTE: you can only use these deductibility rules to deduct a proportion of the taxable base of the expense, that is, you will not be able to deduct any amount from the VAT of the invoice.

Here I have explained these deductions in a summarized way. If you are interested in knowing more, in this article, we will break it down much more.

7. The platforms I work for paying me for my lessons, discounting commissions. How do I count them?

In these cases, you have two ways to compute it:

1. Consider as income what you receive, that is, the payment for your lessons less commissions. It is the easiest and most effective way because you usually do not have access to the justification of that commission.

2. Computing the total price of your lesson and including the commission charged by the platform as an expense.

8. Billing with Italki

First of all, you have to bill Italki. Our advice is that you include several works in the invoice that you issue to Italki (at least once a month), and that it also matches the money you download from the platform, it can be to Paypal or your bank account. In this way, you can justify that the amount of the invoice coincides with the download of the money you receive.

Another tip that we find interesting that you take into account is to keep track of the classes you include in each invoice. You can do this directly at the time of issuing your invoice or take a separate excel file where you register that relationship. Keep in mind that in the event of a review, the more transparent your management is, the easier it will be to pass a tax verification.

Regarding the issuance of the invoice, you must fill it in with Italki’s tax information. The amount must be in euros of the amount you are downloading. 

Italki will pay you 85% of the price of your classes. Sometimes you may earn less for the currency exchange (from dollars to euros) that your bank or Paypal manages for you. The invoice is without VAT and withholding, since the client’s tax address, Italki, is in Hong Kong.

If you use Paypal as a payment gateway, you can include as an expense the commission they charge you.

We hope we have given you a global vision of the development of this booming activity. If thanks to this you decide to start it, we will be happy to continue advising you through our platform.

Related articles

Online Language Teacher: Being Self-employed in Spain

How Can I Register as a Self-employed Worker in Spain?

How italki can help boost your career?