Annual Income Statement Guide For Freelancers In Spain
Tax Agency (Hacienda)
Table of Contents
1. Obligation to make the annual income statement
At Selfemployed Spain, we often receive the question: Am I obliged to make the annual income statement?
As indicated by the Tax Agency on its website, all taxpayers who are individuals living in Spain during the previous year are required to declare.
You are NOT obliged to present the statement in the following situations:
1.1. Individuals with a single payer
Individuals who have received income from work below 22,000 euros from a single payer during 2022 are not required to declare. They can if they want, and the result is a refund in most cases.
1.2. Individuals with more than one payer
It is unnecessary to present the income tax return when there are two or more payers and income from work below 22,000 euros when the sum of the second and subsequent payers (in order of amount) does not exceed 1,500 euros per year as a whole.
1.3. Individuals who receive passive benefits
You will not have to declare when your income comprises passive benefits. These are, for example, Social Security pensions, pension plan benefits, group insurance, etc. Of course, provided that the determination of the type of withholding has been carried out following the special procedure established by regulation. You should request this procedure through form 146.
1.4. The limit becomes 14,000 euros gross per year
The limit is 14,000 euros per year, instead of the initial 22,000 euros, in the following cases:
- When they come from more than one payer, as long as the sums received from the second and remaining payers exceed the amount of 1,500 euros per year.
- If you have received the income for compensatory pensions of the spouse or annuities for food (unless the latter comes from the parents by judicial decision).
- When the payer of the yields is not obliged to withhold.
- If total income from work is obtained, subject to a fixed withholding rate.
1.5. Other circumstances
If the taxpayer finds himself in any of these situations, he will not have an obligation to file the income tax return either:
- Taxpayers who have got total income from movable capital and capital gains subject to withholding or payment on account, as long as they do not exceed the amount of 1,600 euros per year.
- Those taxpayers who have obtained imputed real estate income, yields from Treasury Bills or subsidies to purchase officially protected or appraised price housing, with the joint limit of 1,000 euros per year.
- Those taxpayers who have exclusively total income from work, capital (furniture or real estate) or economic activities, or capital gains, when the sum of all of them does not exceed 1,000 euros per year.
- Those who have had, exclusively, property losses of less than 500 euros.
Regardless of whether you have the obligation to make the 2022 income or not, if you want to take advantage of reductions or deductions, you have to confirm the draft or present the declaration. Also, if the result is a refund and in order to be returned, you must present the income statement.
All these limits apply, whether you make the statement individually or jointly. We recommend you do the math and check which one interests you the most before submitting your individual statement.
Let’s see when making the joint income statement is interesting and when individually.
2. Individual or joint statement
Making the joint or individual declaration is to choose the most appropriate one to pay fewer taxes. Here are the keys to the cases in which you have to make it jointly and what this entails.
2.1. Requirements for submitting the joint income statement
It is a modality that those who are in these situations can only use:
- With a marital relationship. That is, you are married, with or without children.
- No marital relationship. You are (legally) separated, divorced, or your spouse is deceased. But be careful! In this case, it is mandatory to have dependent children.
- If you have a common-law partner and children, only one of you can file the joint return with the children.
We will review the family situations that can generate doubts about whether joint taxation can be applied.
2.2. Biparental family
Families formed by spouses and, if any:
- Minor children, except those who, with the consent of their parents, live independently of them; and
- legally incapacitated children of legal age subject to extended or rehabilitated parental authority.
2.3 Single-parent family
That is the case of widowed, single or legally separated persons who, having guardianship or custody of their children, may pay taxes jointly with them.
2.4. Legally separated couple and joint custody of the children
In this case, the ex-spouses must agree on who can pay taxes jointly with the children since only one can do so. A viable option is that each year one of them does it.
But it is crucial to know that it is impossible to divide the children for the joint declaration in the case of several common children. In the joint declaration, whoever the parent makes must include all the common children.
2.5. De facto couples
De facto couples cannot opt for joint taxation. Only if there are common children one of the couple members may opt for joint taxation with the children, as with single-parent families.
2.6. Assumption: marriage after separation having custody of their children
When marrying again, the joint declaration will include their children, the new spouse and their children, if any, and the reduction of €3,400 would be applied as a two-parent family.
2.7. Assumption: marriage after separation without having the guardianship and custody of their children
Here, the criterion of the Treasury is something particular. The Treasury does not allow filing a joint income statement with the new spouse since it argues that by having to include all minor children in the joint return, and since, in this case, it is not possible because they do not have custody over them, only joint declaration with the new spouse when the children are of legal age.
2.8. Some aspects to consider:
2.8.1 ONLY ONE EARNS INCOME
With biparental families, in which only one spouse earns income, as a general rule, joint taxation will mean tax savings.
2.8.2 COMPENSATION OF NEGATIVE ITEMS
In joint taxation, negative items made and not offset by any of the taxpayers who are family unit members in previous tax periods are compensable (for example, losses from the sale of an inherited property).
Regardless of whether, in the periods in which they occurred, they had been taxed individually or jointly. Thus, for example, in the joint return for the year 2022, a capital loss obtained by the wife in her statement for the year 2020 is compensable.
On the contrary, in individual taxation, these items, even if they come from a period in which the family unit members paid taxes jointly as if they came from one in which they did it individually, can only be compensated by the taxpayer to whom it corresponds.
For example, in the individual statement that the husband files in 2022, a property loss that the wife had in 2019 cannot be compensated, regardless of whether the 2020 return was individual or joint.
2.8.3 NO ONE CAN FORM PART OF TWO FAMILY UNITS AT THE SAME TIME
2.8.4 DETERMINATION OF THE MEMBERS OF THE FAMILY UNIT
It is determined who forms part of the family unit based on the situation as of December 31 of each year.
3. Deduction for the acquisition of habitual residence: transitory regime
Law 16/2012, of December 27, abolishes the deduction for investment in habitual residence with effect from January 1, 2013.
However, for taxpayers who had been deducting for a habitual residence before January 1, 2013 (except for contributions to housing accounts), the Law mentioned above 16/2012 introduced a transitory regime that allows them to continue enjoying the deduction in the same terms and with the same conditions existing on December 31, 2012.
Who can apply for this deduction in 2022?
The following taxpayers may apply this deduction:
- Taxpayers who had purchased their primary residence or paid amounts for its construction before January 1, 2013.
- Those who had paid amounts prior to January 1, 2013, for rehabilitation works or expansion of the habitual residence, provided that the works mentioned above finished before January 1, 2017.
- Taxpayers who have paid amounts for the execution of works and adaptation facilities of the habitual residence of people with disabilities prior to January 1, 2013, as long as the aforementioned works or installations are finished before January 1, 2017.
In any case, to apply the transitional deduction regime, taxpayers are required to have applied the deduction for said dwelling in 2012 or in earlier years.
Taxpayers who wish to exercise the right to a deduction for investment in the primary residence of the transitional regime will be required to file a personal income tax return.
What is the maximum deductible investment base?
For investments in the acquisition, rehabilitation, construction or extension of the habitual residence, that maximum amount is 9,040 euros per year. You will apply this limit in the same amount in joint taxation.
What you can include in the investment basis?
The amortization of the capital and the interests and other expenses derived from the financing will form part of the investment base.
Can you include the cost of a home and life insurance in the investment base?
Yes, you can include the cost of life and fire insurance contracts, as long as they are included in the conditions of the mortgage loans obtained for the acquisition or rehabilitation of the habitual residence.
What is the applicable deduction percentage in the acquisition or rehabilitation of the habitual residence?
The general percentage is 15% (7.5% state section / 7.5% regional section).
In other words, if in the financial year 2022, you have paid €4,500 in mortgage payments, plus €250 in fire insurance and another €500 in life insurance, the amount that you can deduct will be:
Investment base: €4,500 + 250 + 500 = €5,250 x 15% = €787.50
4. Rent deduction for tenants: transitory regime
Those rented with contracts after 01/01/2015 are not allowed to make a state deduction for the amounts invested in their rent. Although there are communities with rental deductions enabled, each has its own requirements and limits.
When the Tax Agency approved the deduction for rent in 2008, the aim, besides benefiting the tenants, was the fiscal control of the large number of rents not declared by their owners.
The fact that it was profitable for the tenant, from the tax point of view, to declare what was paid as rent to reduce the tax bill meant that the owners had to bring to light the returns obtained by these hidden rents for the Treasury.
Apparently, fiscal control is no longer necessary, or the rent deductions are supposed to exceed the budget limits. We don’t know the real reason, but in the 2015 income tax statement, only rentals with contracts before 01/01/2015 could continue to apply deductions. All contracts after 01/01/2015 cannot practice the state income deduction.
After this brief review of what happened with the rent deduction, we are going to relate the requirements that you must meet to apply for this 2022 income return deduction:
- Lease habitual residence dated before 01/01/2015.
- The maximum deduction base is €9,040. If you pay more for your rent, the excess will not be part of the deduction.
- Your tax base must be less than €24,107.20.
- You can deduct 10.05% of the amounts paid in the tax period for the rental of your habitual residence.
Concerning this deduction, the following situation has arisen, marriage in community property that lives for rent but the contract is in the name of one of them.
The question that arose was whether both could take advantage of the rent deduction for 50% of the amount invested in the rent (they made the payments from marital money).
The General Directorate of Taxes (DGT) and the doctrine of the Supreme Court coincide in establishing that the amounts paid by any person other than the titular tenant will not give the right to the deduction for rent of habitual residence.
Therefore, the right to apply the deduction only corresponds to the person who appears as a tenant in the rental agreement.
5. Nursery deduction
Since January 1, 2018, this deduction complements the well-known deduction for maternity. It is specifically called: Custody expenses in nursery or early childhood education centres.
Since both are linked, only taxpayers who are entitled to the maternity deduction and who also meet unsubsidized childcare expenses will apply for this new deduction, we are going to review the requirements of the maternity deduction briefly.
5.1. Deduction for maternity
TAXPAYERS WHO MAY BENEFIT FROM THE DEDUCTION
- Women with children under three years of age who carry out an activity on their own or for someone else for which they are registered in the corresponding Social Security or Mutual Insurance scheme. The registration requirement in the corresponding Social Security or Mutual Insurance scheme will be considered fulfilled when this situation occurs on any day of the month.
- In the case of adoption or foster care, both pre-adoptive and permanent, the deduction may be made, regardless of the minor’s age, during the three years following the date of registration in the Civil Registry.
- In the event of the death of the mother, or when the care and custody are attributed exclusively to the father or, where appropriate, to a guardian, he will have the right to practice the deduction (for the amount that has been pending to the mother), as long as they carry out an activity on their own or for another’s account for which they are registered in the corresponding Social Security or Mutual Insurance scheme.
AMOUNT OF THE DEDUCTION AND LIMITS
- The deduction is 100 euros for each month the taxpayer is working and will be computed from the month of birth to the previous month in which the child turns three.
- Therefore, the maximum deduction for each child under three years of age will be €1,200 per year, establishing as a limit the contributions and total contributions to Social Security and Mutual Insurance accrued in each tax period after the birth.
The State Tax Administration Agency may be requested to pay the deduction in advance for each of the months they are registered with Social Security or Mutual Insurance and quote the minimum terms established by regulation.
5.2. Custody expenses in Nursery or Early Childhood Education Centres
TAXPAYERS WHO CAN BENEFIT FROM THE DEDUCTION
As we have already mentioned before, only taxpayers who are entitled to the deduction for maternity and pay non-subsidized nursery expenses may apply for this deduction.
WHAT ARE CONSIDERED CUSTODY EXPENSES
- Payments for registration or enrollment, attendance (general or extended hours) and food, provided they have been incurred for whole months.
- And that they have also been paid to authorized nurseries or early childhood education centres.
AMOUNT OF THE DEDUCTION AND LIMITS
- Its amount is 83.33 euros (1,000 euros / 12 months) for each month in which childcare expenses are paid and the requirements to enjoy the maternity deduction of 100 euros are met.
- The deduction has two limits:
- The contributions and total contributions to Social Security and Mutualities accrued in each tax period after the birth.
- The total amount of actual non-subsidized expenditure paid in each tax period to the daycare or educational centre in relation to this child.
Unlike what happens with the deduction for maternity, which can only be computed up to the month before the child turns three years old, this incentive can be applied to expenses incurred after three years of age until the previous month in which the second cycle of early childhood education can begin.
An example will make it more transparent:
If your child turns three in April, you can apply for the maternity deduction until March (provided you meet the requirements).
However, you will be able to apply the deduction for childcare expenses until the month of August (if there is a nursery) since the second cycle of early childhood education can begin in September.
This increase is recorded in each year’s income tax return, and there is no possibility of paying it in advance.
6. Income statement submitted with errors. What can you do?
Making mistakes in the income statement happens often. Still, it is not the end of the world. The Tax Agency also offers you explanatory videos on carrying out these procedures.
The most important thing is to know what case you are in and what procedures you have to carry out, and we are going to focus on that at this point of the guide.
6.1. Errors to the detriment of the taxpayer
Suppose you improperly declared any exempt income, computed amounts over the amount due, or forgot to apply any reduction or deduction to which you were entitled, assuming economic damage to you. In that case, you must check box 127 and request the rectification of the statement. That’s having in mind that the Administration has not carried out a provisional or definitive liquidation for that reason and that the 4-year period has not elapsed.
You must complete the modification of the submitted tax return, which will include, besides the data reflected in the original self-assessment, those of new inclusion or modification. This link on the Tax Agency page explains the procedure to follow to rectify the income statement.
6.2. Errors to the detriment of the Public Treasury
Suppose you have made an error or omission in your already filed tax return that has motivated the realization of a lower income than that which would have legally corresponded or the realization of a higher refund than the appropriate one. In that case, you must regularize that situation by filing through Renta WEB a complementary declaration to the one initially presented.
This link on the Tax Agency website explains all the details related to filing supplementary returns.
If you do it before the end of the Renta campaign on June 30, the Treasury will not penalize you. On the other hand, if you realize that later, the Treasury will impose a late filing surcharge depending on the time elapsed between the end of the voluntary period (30/06/2023) and the filing date. In this link, you have related the different surcharges depending on the time elapsed.
THERE ARE 2 SOLUTIONS
In short, if you have already submitted your income tax return and notice any error or omission in the declared data, 2 possibilities:
- Suppose they have involved a lower income or a higher return. In that case, these errors must be regularized by submitting a declaration complementary to the one originally presented.
- On the other hand, you must submit a self-assessment rectification if they have involved a lower return or a higher income.
Both procedures are explained in this link located within the 2022 Income Campaign.
6.3. …and if you don’t realize the mistake?
You may not be aware of the error, so you may not be able to correct it. In this case, the Treasury will send you a provisional settlement where the data you have declared and the data that the Tax Agency considers to be correct will appear, based on the crossing of information with its databases.
The Treasury doesn’t have access to all the data about you, so we recommend that you claim if you detect that the data is incomplete or information is missing.
Of course, if it finally turns out that the Tax Agency is right, they will sanction you. The amount depends on each case, and you can always take advantage of discounts if you don’t resort and pay on time.
7. Pay less on your income statement
Suppose you have developed an economic activity during 2022. In that case, you will be interested in knowing how to pay less on your annual income statement with these reductions.
7.1. Reduction of 20% for starting an economic activity
That is undoubtedly the best reduction for the self-employed who have started economic activity in previous years. I explain below what requirements you must meet and the advantages.
WHAT REQUIREMENTS MUST BE MET TO ACCESS THIS REDUCTION?
1. Start an economic activity. Here we must consider that you had started an economic activity when you hadn’t carried out an economic activity in the year before the activity’s start date, both in Spain and abroad.
An example will make it more transparent.
We imagine you started the activity on 03/03/2022. Then to consider that it is the start of the activity, you cannot have carried out any economic activity since 03/03/2021.
2. You will apply this reduction in the first fiscal year, where the net income from the activity is positive, and the following fiscal year.
We continue with another example. If you started the activity on 03/03/2021 and in 2021 the net return (the profit from the activity was negative, and you had losses), but in 2022 you had some profit, you can apply the reduction in the 2022 and 2023.
3. What if you work as a self-employed person for the company you were previously an employee for? If this is your case, you can only apply the reduction if, during the 2022 financial year, you have billed your old company for less than 50% of your income.
Example: you registered on 03/03/2022, and in the previous year, from 03/03/2021 to 03/03/2022, you were working for a company as an employee. Now imagine that the total income in 2022 is €18,000 (without considering VAT). So to apply the reduction, you will have to have invoiced your old company for less than €9,000.
HOW MUCH DO YOU BENEFIT BY APPLYING THIS REDUCTION?
If you meet the above requirements, you can apply a 20% reduction to the net income of your economic activity. If we calculate your benefit (income minus expenses) to that figure, we remove 20%.
Let’s go with an example. If your profit in 2022 was €15,000 (18,000 income minus €3,000 of expenses), you would only be taxed for €12,000 (€15,000 – 20%), and the tax savings will be greater than €600.
7.2. Do not forget to include all deductible expenses
Another way to pay only the corresponding taxes and never more, is to include all expenses considered deductible in the exercise of your activity and have the supporting documents.
This article lists the most common expenses that the self-employed usually have. I advise you to review them one by one and analyze which ones occur in the exercise of your activity. In this way, you will reduce your benefit and, therefore, the payment of taxes.
7.3. Community deductions related to the self-employed
There are already 5 Spanish Reginal Communities that include some deductions related to the self-employed. Let’s analyze them.
7.3.1. COMMUNITY OF MADRID
Deduction for promoting self-employment of young people under thirty-five years of age.
It is a direct deduction of €1,000 that they can apply to self-employed workers under the age of thirty-five who start an economic activity for the first time. Therefore it is a deduction that you can only apply once.
What requirements must you meet to apply this deduction?
- You can be at most 34 years old in the 2022 financial year
- You must carry out your economic activity mainly in the territory of the Community of Madrid.
- You have to maintain the activity for at least 1 year from the registration date.
When we talk about direct deduction, we mean that the deductions of the quota mean that if your 2022 income comes out to pay €2,500, approximately half, €1,250 corresponds to the IRPF that you pay to your community. The other half is IRPF which corresponds to the State. Well, of the €1,250 which corresponds to your community, you would only have to pay €250 when applying the deduction, leaving the total income statement payment at €1,500.
7.3.2. COMUNITAT VALENCIANA
Deduction for conciliation with family life.
Mothers who carry out an activity on their account for which they are registered in the corresponding Social Security or mutual insurance scheme will be entitled to a deduction of 460 euros for each child over 3 years of age and under 5.
In addition, there are two other requirements:
- Minors who generate the right to the deduction must also give the right to the minimum for descendants.
- The sum of the general taxable base and the taxpayer’s savings taxable base may not exceed 30,000 euros in individual taxation or 47,000 in joint taxation.
We can also apply this deduction to mothers who carry out an activity as an employee.
7.3.3. PRINCIPADO DE ASTURIAS
For taxpayers who establish themselves as self-employed in councils at risk of depopulation
Amount and requirements for the application of the deduction
The amount of the deduction is 1,000 euros per taxpayer, provided that they meet the following requirements:
- Have their habitual residence in councils at risk of depopulation.
- That the exercise of an activity in the Principado de Asturias begins in 2022 as a self-employed worker.
For these purposes, we will understand the start of activity as the date of registration in the special Social Security regime or in the corresponding mutual benefit society.
- To maintain the registration situation for a minimum period of one year, except for death within said period.
For taxpayers who transfer their tax domicile to the Principado de Asturias for work reasons to carry out specially qualified jobs, directly and mainly related to research and development, scientific or technical activities.
Deduction amount and limit
– 15% of the expenses that are generated for the taxpayer because of the transfer of his tax domicile to the Principado de Asturias for labor reasons for the development of specially qualified jobs, directly and mainly related to research and development, scientific or technical character.
– Maximum deduction limit: 2,000 euros.
Specific requirements for the application of the deduction
– That the taxpayer has not been a resident in the Principado de Asturias during the four years prior to the date of transfer for work reasons.
– That the taxpayer establishes ther habitual residence in the Principado de Asturias and that it be maintained for at least three years in addition to the transfer itself.
– In the case of self-employment, the taxpayer is registered in the special Social Security regime or in the corresponding social security mutuality.
In this link you have explained in detail what expenses are considered generated as a result of the transfer, and what jobs are considered specially qualified for the application of this deduction.
7.3.4. CANARY ISLANDS
For transferring the habitual residence to another island of the Archipelago to carry out an economic activity.
300 euros in the tax period in which the change of residence occurs and in the following.
Requirements for the application of the deduction
– The transfer of habitual residence from the island where you reside to any of the other islands of the Archipelago must be motivated by carrying out an economic activity.
– In order to consolidate the right to the deduction, the taxpayer must remain on the island of destination during the year in which the transfer occurs and the following three.
7.3.5. MURCIA REGION
For working women
– 300 euros in the case of the first child.
– 350 euros in the case of the second child.
– 400 euros in the case of the third or successive children.
– 400 euros per dependent person in charge.
Requirements and other conditions for the application of the deduction
This deduction will correspond exclusively to women and the requirements for its application are:
– That the woman beneficiary of the deduction carry out an activity on her own account, for which she is registered in the corresponding Social Security or mutual insurance scheme.
– They may generate the right to deduction:
- Children under 18 years of age.
- Dependent people.
This deduction is also applicable to mothers who carry out an activity as an employee.
7.4. 5% of costs that are difficult to justify
If you calculate your income return using the simplified direct estimation method, you will be able to benefit from these costs that are difficult to justify.
In other words, you will reduce your economic performance by 5% without having to justify that reduction. The Renta web program applies this expense automatically, and it can never exceed €2,000.
In 2023 this percentage has increased from 5% to 7%.
Deductible Expenses If You Work at Home
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