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Self-employed in Spain Working with Upwork

Working with Upwork

If you are a freelancer, you have probably heard about Upwork or even use the platform to get jobs and clients. Although the platform is in English and all processes, registrations, contacts with clients, acceptance of projects, etc., are enabled in that language, there are many Spanish speakers who use it.


In this article, we will focus on explaining how income invoices should be issued and compute the expenses that are generated when working with Upwork. If you are interested in knowing how to work with Upwork, how to register, how to get accepted and practical advice on how to work with the platform, you can find a lot of information on the internet (one of the posts about Upwork that we liked most in our inquiries was written by Isaac P.).


To be able to write this post we have consulted on the Upwork page the legal terms and its service in order to understand how they raise their business and the relationship with their clients. There are really two types of customers, on the one hand, the companies that apply for jobs (hereinafter the company) and on the other hand the freelancers who are willing to develop them (hereinafter freelancers).


How does Upwork work?

First, in order to determine who you need to bill, for what amount and when, it is necessary to understand the work system that Upwork poses to companies and freelancers. This would summarize the process:

1. Both types of clients, company and freelancers, will create a profile in Upwork.

2. The company presents a project to obtain proposals from freelancers.

3. The freelancer, using the search engine to find opportunities, finds the project uploaded by the company to Upwork and submits a proposal.

4. The company values all the proposals received and selects a freelancer to carry out the project, making a contract through the platform.

5. At that moment Upwork becomes a depository of the amount to which the price of the project rises, guaranteeing the future collection by the freelancer.

6. Once the project is finished, it is sent to the company for evaluation. If there is no objection from the company, Upwork transfers the amount of the project price to the account that the freelancer has in Upwork.

7. The freelancer’s account in Upwork will increase with each project, being able to withdraw these funds through different systems (the most used: Paypal, Payoneer, direct deposit to a bank account).


Who should you bill?

Once the work process proposed by Upwork has been analyzed, we conclude that Upwork does not make a service contract with the freelancer to develop the company’s project, but that its position is pure intermediary (putting companies in contact with certain needs and freelancers with skills to develop them) and guarantee payment for the service performed. Therefore, the legal relationship for the development of the project is composed of two parts, the company and the freelancer. For this reason, the freelancer must issue an invoice in the name of the client and not in the name of Upwork.

We have verified that the invoice that you can download from the Upwork platform only reflects some customer information (name and country), but not all of them must be included in an invoice to be legal according to Spanish regulations, so the company would have to be asked for the full address and the tax identification number assigned by their country.


What would be the amount you should put on your invoice?

Here the question is a bit more complicated, but we will try to explain each of the aspects that you should take into account.

1. Taxes

From what we have verified in the invoices that you download from the platform, no tax related to Spanish regulations, VAT or IRPF is reflected. That is, what you charge for the development of the project is the total invoice once taxes have been applied, if any. Many different situations can occur here since the application of taxes depends on both the tax obligations of the freelancer and the nationality of the company to which you invoice.

To try to simplify we will use the most common freelancer profile, according to our experience, that is, a freelancer who exercises a professional activity, subject to withholding and VAT. And we will raise 3 different situations with an example in each of them.



COMPANY: Spanish limited company that pays for the project $ 600 *

Since a Spanish company is being billed, the freelancer invoice must carry 21% VAT and a 15% withholding, and being the total invoice $ 600 these are the amounts that should be included in the invoice:

Taxable base: $ 566,03
VAT 21% $ 118,86
Withholding 15% $ -84,90
TOTAL INVOICE                $ 600,00

(*) later we will explain how we make the currency exchange to euros.



EMPRESA: German company that pays for the project $ 600 *

As it is an operation with an EU company, it is important to know whether both parties, that is, freelancer and company, are registered in ROI or VIES (Registry of Intra-Community Operators) or not. To know if the company to which you bill is registered in ROI (called the VIES census -VAT Information Exchange System- at community level) you can check this link.


EXAMPLE 2.1. Freelancer and company are registered in ROI (VIES census)

In this case, the freelancer must not apply VAT or personal income tax (IRPF) on their invoice, but must submit form 349 where intra-community operations are communicated.

Taxable base: $ 600,00
VAT 21%
Withholding 15%
TOTAL INVOICE                 $ 600,00


EXAMPLE 2.2. Some of those included in the invoice (freelancer or company) are not registered in ROI (VIES census).

In this other case, VAT would apply, but not personal income tax (IRPF).

Taxable base: $ 495,87
VAT 21% $ 104,13
Withholding 15%
TOTAL INVOICE                 $ 600,00



EMPRESA: American society that pays for the project $ 600 

When invoicing a company from a third country (neither Spanish nor EU), no tax, VAT or personal income tax, should be included in the invoice.

Taxable base: $ 600,00
VAT 21%
Withholding 15%
TOTAL INVOICE                  $ 600,00


2. The currency

Your invoices must be in euros, so starting from the amount of the service in dollars, you must use the euro-dollar exchange rate on the date of the invoice to indicate all the amounts in euros. 

We give you an example:

You have received in your Upwork account $ 600 for the completion of a project on 02/09/2019. Since the dollar-euro change that day was 0.91 (we used this website to calculate the change), the amount you should indicate on the invoice should be € 546.


What date do I put on the invoice?

The rule states that you must invoice once you have provided the service, and therefore, it should be the date on which you deliver the work, but knowing the work of Upwork where you will not have the money from your services at your disposal until Upwork has the company compliance. We consider it more consistent to date the invoice with the same date you receive the payment and use that date to make the currency exchange.


What expenses can I deduct related to Upwork?

1. Fee for commissions

The services provided by Upwork have a cost of commissions that will be 5, 10 or 20% of what you bill to your customers, depending on the following table:

20%      for the invoiced to a client between $ 0-500
10% for what was billed to a client between $ 500.01-10,000
5% for what is billed to a client from 10,000 onwards


Which means that if you have more long-term relationships with your clients, you will pay fewer commissions.

21% VAT applies to this Upwork commission if you are not registered in ROI (VIES census). A VAT that you can deduct if you have the invoice that justifies it.


2. Membership fee

Monthly Upwork will charge you a fee for being a member and being able to access the search for projects to submit proposals. That fee is also considered deductible. This Upwork fee also applies 21% VAT if you are not registered in ROI. A VAT that you can deduct if you have the invoice that justifies it.


3. Commission for withdrawal of money

Among the money withdrawal systems, one of the most used is the direct deposit to your bank account. For the use of this system, Upwork charges you a commission of $ 0.99, commission that you can also deduct.

So, if you enter your Upwork account you will see something similar to this:


Aug 25, 2019 | Withdrawal Fee | Withdrawal Fee – Direct to Local Bank Transfer | ($0.99)

Aug 25, 2019 | Withdrawal | Direct to Local Bank Transfer to xxxx-1234 | ($599.01)

Aug 22, 2019 | VAT | VAT – Service Fee – Ref ID XXXXXXX | ($6.75)

Aug 22, 2019 | Service Fee | Service Fee – Ref ID XXXXXXX | ($32.12)

Aug 20, 2019 | VAT | VAT – Membership – Ref ID XXXXXXX | ($3.15)

Aug 20, 2019 | Membership Fee | Subscription Renewal Charges | ($14.99)


As with the income, Upwork charges are also in dollars, so, in order to include them in your expense book, you must make the change to euros on the date that Upwork charges you.

Upwork opens up the possibility for freelancers, who start in self-employment, to get clients and generate their first income, but it is very important not to forget the tax and accounting implications that the use of these digital intermediation platforms has for the Spanish self-employed workers.


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