VAT is a tax that you must pay when you provide a service or deliver goods, unless your work qualifies as a VAT exempt activity. In this article, we will explain what VAT exempt activities are in 2025, who can benefit from them, and what key obligations self-employed professionals need to keep in mind.
In Spain, the general, reduced and super-reduced VAT rates are 21 %, 10 % and 4 % respectively, according to the Agencia Tributaria. You will find the super-reduced rate applied to essential goods such as food and medicines.
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1. Example of VAT exempt activities
Although the rule is that all deliveries of goods and services are subject to VAT, there are activities exempt from paying the tax.
According to the official information from the Agencia Tributaria (Spanish tax authority), the following are exempt transactions: healthcare, educational activities, social welfare assistance, cultural activities, sporting activities, financial transactions and insurance, real-estate operations.
Here are some of them in more detail:
1.1. Education
If you teach in public or private centres, as well as private classes to individuals when the subject is included in the curricula of the Spanish educational system, the service may be VAT exempt.
For example: a freelance English course taught at a school where children study would be an activity exempt from VAT.
1.2. Health service
If you are a health or medical professional, assistance to individuals is generally exempt from VAT.
1.3. Art
If you are a professional and, besides your services as a professional, you include copyright, this is the case of writers, plastic artists, graphic collaborators, among others. Then, your activity may be VAT exempt.
1.4. Finance
This includes all mediation services performed to individuals in exempt financial operations. Also included are those services that public notaries provide in exempt financial operations.
1.5. Insurance
All services and operations that are related to insurance and capitalisation are exempt from VAT.
1.6. Rentals
The leasing of homes and the delivery of rural non-buildable land are exempt from VAT.
2. What happens when you perform a VAT exempt activity?
If your activity is exempt from VAT, you should not include VAT on your invoices. That means that when you register with the Tax Agency (AEAT), you must mark that you exclusively carry out VAT-exempt operations.
Therefore, you will not have to submit quarterly Form 303 (the standard VAT return) or the annual VAT summary (Form 390) for those exempt operations. Historically, this was the case under the normal direct estimation regime.
However, an important update for 2025: Spain still requires registration of VAT-exempt supplies and notification, and the fact that an activity is exempt does not automatically mean full relief from all obligations.
According to the AEAT website, exempt domestic transactions allow the business to avoid VAT charge, but they cannot deduct the VAT they pay on purchases related to the exempt transactions.
3. Registration with Social Security (RETA) and self-employed status
Until recently, the regulations did not clearly define when it is mandatory to register in the Régimen Especial de Trabajadores Autónomos (RETA) for self-employed. The law speaks of “habituality” in the activity’s development. Courts have considered that “habitual” means an activity that generates returns higher than the inter-professional minimum wage.
Our advice remains: whenever you start an economic activity, register in RETA.
4. Withholdings and Form 130
When you carry out a professional activity (for example, training or courses given by a self-employed person), the invoices you issue to Spanish companies must often be subject to withholding.
In other words, if your training service amounts to €100.00, you will charge €85.00 (€100.00 – 15 %) on your invoice. The €15.00 that your client keeps must enter the Treasury in your name. With that amount, the Treasury will already have part of the taxes you will have to pay.
If over 70 % of your income is subject to withholding, you will not be obliged to submit Form 130 of fractional payment. With this form, the idea is you pay part of your tax quarterly. Historically, we talk of 15% general rate; a reduced rate of 7% applies to newly registered self-employed individuals for the current year and following two years.
With the reduced 7% withholding, you have more liquidity during the year, as you charge more on your invoices (for example, instead of charging €85, you charge €93).
5. Social Security payments and flat-rate regime
One of the main costs for anyone carrying out a VAT exempt activity as a self-employed professional in Spain is the monthly Social Security contribution. Since 2023, Spain has adopted a progressive contribution system based on income brackets, meaning that the amount you pay depends on your real monthly earnings. The higher your income, the higher your contribution.
If you are newly self-employed, you can still benefit from the flat-rate scheme (“tarifa plana”), which allows you to pay a reduced fee of €80 per month for the first 12 months, regardless of income. After that, your contribution adjusts according to your declared income bracket.
For a detailed explanation of how these income brackets work and how to calculate your contribution, you can read our full guide: Social Security Contributions in Spain.
6. Deductible expenses if you work from home
It is coherent that a shoemaker who owns a small shop can deduct electricity, water, gas, telephone and Internet related to his shop as expenses.
What happens to a teacher who uses a room in their home? Does it make sense that they can deduct part of the supplies?
The answer is yes. Since 01/01/2018 the law (Law 6/2017 on Urgent Reforms of Self-employment) set clear rules. If the taxpayer partially designates their habitual residence to the development of economic activity, they can deduct a proportion of the supplies.
The expenses of supplies (water, gas, electricity, telephony and Internet) will be deductible in the percentage resulting from applying 30% to the proportion between the square metres of the dwelling designated for the activity and its total area.
Learn more on how this percentage applies in our article on Deductible expenses if you work at home.
7. Other deductible expenses
The criterion that must always be very clear when including payment as a deductible or not is the correlation criterion between income and expenses. If the expense is necessary and you incurred it to achieve income, you can deduct it.
Therefore, all those expenses that a teacher has to carry out his activity and get income will be deductible.
However, it is essential to prove these expenses. That is, you must keep the complete invoice and the payment receipt.
8. Mandatory accounting & record-keeping books
There is a false idea that if you register for a VAT exempt activity you don’t have accounting or registration obligations either. That is incorrect.
Even if your supplies are VAT exempt, taxpayers who carry out professional activities under direct estimation (in either modality) must keep the following record books:
- Income record book.
- Record book of expenses.
- Record book of investment assets.
And in many cases, the full bookkeeping of the self-employed activity.
Frequently Asked Questions (FAQs)
Here are some questions that people ask frequently about VAT exempt activity, and the answers to them:
1. What exactly is a “VAT exempt activity” in Spain?
A VAT exempt activity is one where the delivery of goods or provision of services is exempt from charging VAT. That means you do not add VAT to your invoices for that activity.
But you must still comply with other obligations (registering, record-keeping, etc.). For Spain, exempt transactions include education, healthcare, social welfare assistance, cultural and artistic services, financial and insurance operations, and some real-estate dealings.
2. If I only perform VAT exempt activities, do I still register for VAT?
Yes, you do. Even if your supplies are exempt, you still may need to be registered with the tax authority (the AEAT) and mark that you carry out exempt operations. The fact your activity is exempt does not automatically mean “no registration”. The details depend on your business structure and other taxable/untaxed operations you may carry out.
3. Can I deduct VAT on purchases if I only do VAT-exempt supplies?
No, you can’t. If your activity is VAT exempt, then you cannot deduct the VAT you pay on your purchases relating to that exempt activity. That is a key consequence of exemption: you are relieved from charging VAT, but you lose the right to recover input VAT for those supplies.
4. If I both perform taxable and exempt activities, what happens?
In that case, you must apply the partial exemption rules as you enter the “prorrata” regime.
You will have to separate your deductible input VAT between the taxable part of your activity and the exempt part. The taxable supplies require you to charge VAT. You do not charge VAT for exempt supplies. You must keep books and records showing the split.
5. Are all educational or healthcare services exempt from VAT?
Not necessarily. The exemption applies when certain legal conditions are met (for example the activity must correspond to the official curricula in education, or the healthcare service must be a bona-fide medical professional assisting individuals). It is important to check the specific criteria.
6. Are there any new small-business VAT exemptions from 2025 I should know?
Yes, there are. Starting from 1 January 2025, under the EU SME scheme, eligible small businesses may benefit from a VAT exemption in other Member States if they meet the turnover thresholds and other conditions. (according to Marosa VAT)
Also, Spain is negotiating to define more precisely how this scheme will work domestically.
7. If I am self-employed in Spain and carry out a VAT exempt activity, what about my Social Security contributions?
Your Social Security contribution (RETA) is independent of whether or not your activity is VAT exempt.
You still need to assess whether you must register as self-employed and what contribution base applies. The fact that your activity is exempt from VAT doesn’t exempt you from self-employment registration or Social Security payments.
8. Do I still have to keep accounting books if I only carry out VAT-exempt activities?
Yes, you do. Being exempt from VAT does not relieve you from record-keeping obligations. If you carry out a professional self-employed activity under direct estimation, you must keep the income, expenses and investment-assets books.
9. What if the Spanish government introduces new VAT rules (e.g., for rentals) — how does it affect exempt status?
Any change in law or regulation can affect whether a given supply remains exempt. For example, the government is considering introducing a 21% VAT on short-term tourism rentals under 30 days. If passed, that would mean that what might previously have been exempt (or treated differently) would become taxable, according to Reuters. That’s why you need to monitor regulatory changes.
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