The world of the self-employed is still in the process of digesting the changes in its contribution system when it is already preparing another profound transformation with regard to taxation. Since January of this year, self-employed workers have begun to contribute to Social Security based on their income, a change that will gradually take place until 2025, pending new negotiations for the following years.
Now, what is going to be modified, predictably from 2025, is its taxation. This is a radical simplification, to remove the obligation to submit the VAT return quarterly, provided that the self-employed billing level is less than 85,000 euros per year. It will go to a franchise regime that will eliminate the current regimes of modules and equivalence surcharge.
There is still no formal Treasury proposal on this reform, but the consensus that has been achieved on its main points makes it possible to anticipate its implementation in the coming years. This consensus includes both self-employed associations, unions and employers, as well as experts from the State Tax Administration Agency, the General Directorate of Taxes and the Institute of Fiscal Studies.
"It is about improving the situation of obligations from the point of view of simplification," says Eduardo Abad, general secretary of UPTA, who points out that the new system will be directed fundamentally "to taxis, small parcels, small stores, some restaurants with few tables and bars with limited capacity”.
The main advantage of this franchise regime is simplification, avoiding the small self-employed, those who invoice below the threshold, the cumbersome procedures that they have to complete on time each quarter. Each self-employed person will have to take stock and decide whether to accept the new system, with less bureaucracy, but in which he will not be able to deduct expenses; Or continue with the quarterly VAT declaration, applying VAT to your clients and deducting the VAT they have had to pay. There is an option to choose and the decision may depend on the level of expenses to which it is subjected and that, therefore, can also be deducted.
Those who benefit the most may be those who need little purchase of materials and reduced external services, that is, those who have few expenses, as would be the case of the liberal professions. In addition, those who sell their product or services to individuals will not need to charge VAT. There may be more than 800,000 in total the self-employed who can benefit from the franchise regime.
Everything indicates that a single threshold will be established for all sectors of the self-employed, this ceiling of 85,000 euros, the maximum provided for in the 2020 European directive that promotes this modification, although by UATAE and CC.OO. it is demanded to set separate limits by sectors. The majority thesis is however a single threshold, because it avoids complexities and facilitates an easier application and control. In addition, if this limit is set at a high level, as planned, it will allow a large number of self-employed people to join the franchise.
An open element of discussion is whether to prevent the implementation of the franchise regime from encouraging fraud to, for example, not exceed the exemption threshold, specific control measures are necessary or the current regulatory framework is already sufficient. Some self-employed groups such as UATAE demand "a specific anti-abuse protocol", but no decision has yet been made.
This simplification must be combined with providing the tax administration with the necessary information, which is expected to be achieved with the presentation of the census declaration, billing and registration obligations, and the VAT and personal income tax registration books. In this field, the self-employed associations insist that this information must be submitted only once a year to simplify the process as much as possible.
The franchise regime will replace both the simplified VAT regime and the equivalence surcharge. The simplified regime was created at the time to guarantee the effective taxation of the group of SMEs and, despite its provisional vocation, the years go by and it is still in force. In this case, the VAT settlement is calculated based on fixed economic amounts, the modules, which are established by the Treasury according to the economic activity that is carried out.
The consensus report between self-employed associations, employers, unions and tax authorities describes it as an obsolete regime, currently without justification and does not respond to criteria of economic capacity.
Although everyone agrees to delete it, there is not so much consensus on the deadlines. Where UATAE and CC.OO propose its immediate suppression, UPTA and ATA prefer a gradual suppression, pointing in the case of the ATA association, to a transition period of three years.
