Personal income tax for self-employed workers

How personal income tax is calculated and what forms to submit.

Personal Income Tax (IRPF) is a personal, progressive and direct tax. It taxes income, capital gains and losses, as well as all income imputations established by law, regardless of where they occur. However, taking into account the circumstances of each taxpayer and those of their family members. It is one of the most important taxes in the Spanish tax system.

The IRPF is partially transferred to the autonomous communities. This means that each community can introduce its own deductions. Even so, it is the State Tax Administration Agency that is responsible for collecting it, except in Navarra and the Basque Country, where it is the responsibility of the Provincial Councils.

How is personal income tax calculated?

The income obtained by a person in a tax period is the basis for calculating the IRPF. The sources of income (or revenue) are those obtained from work (salary), capital gains and economic activities (for self-employed persons and entrepreneurs), capital gains and losses, as well as other specifications. For example, general income from real estate attributed under the international tax transparency regime, from the transfer of image rights or those obtained from collective investments in tax havens must be taxed by IRPF.

Personal Income Tax Rates

Personal income tax is calculated based on the taxpayer's income. Therefore, there are income base ranges that correspond to a percentage rate to be applied, which increases exponentially.
Specifically, for annual incomes between 0 and 12,450 euros, the minimum IRPF percentage that applies is 9.5%. It is important to note that incomes below 1,500 euros do not require filing a tax return.
The second bracket covers incomes between 12,450 and 20,200 euros per year, with a minimum percentage of 12%. In the third bracket (incomes between 20,200 and 35,200 euros), the minimum percentage is 15%.
The fourth bracket applies the 18.5%, and corresponds to incomes between 35,200 and 60,000 euros per year. Incomes over 60,000 euros have a minimum withholding of 22.5%. But the rates increase proportionally depending on the income. For example, a taxpayer who has earned 22,000 euros is closer to being subject to the 15%, while one who earns 32,000 euros will be subject to almost 18%, both being in the same bracket.

With these basic indicative ranges, each community can also establish certain deductions for the sections they deem appropriate.

The rest of the incomes to be taxed have other percentages. According to the “Guide to taxes for SMEs and the self-employed”, published by Wolters Kluwer, the income from work is variable. It refers to employment and statutory relationships, pensions and passive assets of the public system, or pensioners with more than one payer. In each case, it is calculated individually and taking into account the autonomous community.

Professional activities of a general nature, on the other hand, retain a 15%, as does the teaching of courses, conferences and literary or scientific works. The leasing or subleasing of urban real estate is subject to 19%. The same applies to movable capital. That is, intellectual property, equity of entities, leasing of movable property, etc.

IRPF models

There are nine IRPF forms, and depending on the circumstances and type of taxpayer, it will be necessary to present one or the other.

• 111This model is submitted by employers with withholdings from employee payrolls or severance payments, as well as invoices for purchases or to other professionals. It is usually submitted on a quarterly basis.
• 115. Only self-employed persons or business owners who rent an office or premises (except if the rent is less than 900 euros per year) need to submit it. It is quarterly and is done between the 1st and 20th of the following month.
• 131It is an exclusive model for self-employed workers, civil companies or communities of property that pay taxes under the module system.
• 130. This corresponds to the quarterly income and expenses of self-employed workers and SMEs with a normal or simplified direct estimate (not modules) when they generate income of less than 600,000 euros in the previous year. This model is used to declare the accumulated profit from economic activity, in order to enter, if applicable, a sum on account of the future annual personal income tax return.
• 180Annual summary of form 115. Submitted before January 31.
• 190. 111 Annual Summary.
• D-100. This is the one that collects the annual income from the economic activities of a worker (self-employed and employed). In the case of self-employed workers, this model is the summary of the declarations of 130 (for those with direct estimation) and those of 131 (by modules), or in case of having withholdings on invoices.
• D-174. It is the declaration of a person's assets, whether or not they live in Spain. Residences with a value of less than 300,000 euros are exempt.
• 720. It is the declaration of assets and rights held outside Spain if they exceed the value of 50,000 euros.
  Source: Five Days-El País