A major change is coming for freelancers and small businesses across the European Union: the introduction of a VAT exemption threshold of €85,000. This new rule stems from EU Directive 2020/285, which requires all member states to adopt a simplified VAT regime for small enterprises by the end of 2024.
Here’s what it means—and where Spain stands.
What the EU Directive Says
Under the directive:
- Freelancers and small businesses with annual turnover below €85,000 can opt for a VAT exemption.
- They won’t need to charge VAT on invoices or submit quarterly VAT returns.
- The exemption can go up to €100,000 for businesses with cross-border operations.
This aims to reduce administrative burdens, lower compliance costs, and make small businesses more competitive.
What’s Happening in Spain?
Spain has not yet fully implemented the directive. While the rule is expected to take effect in 2025, Hacienda (Spain’s tax authority) has clarified that:
- Autónomos earning under €85,000 will still need to charge and declare VAT in 2025, unless Spain officially transposes the directive.
- The government is working with autónomo associations to finalize the framework, but no official launch date has been confirmed.
So for now, Spanish freelancers should continue using the Modelo 303 and 390 for VAT declarations.
Should You Opt In When It’s Available?
Once the VAT exemption becomes available in Spain, it may be a great option for:
- Freelancers with few deductible expenses
- Online service providers with low overhead
- Small businesses targeting price-sensitive clients
However, you won’t be able to deduct VAT on business expenses, which could be a disadvantage if you have high costs.
Key Takeaways
- The €85,000 VAT exemption is part of an EU-wide effort to simplify taxes for small businesses.
- Spain is expected to adopt it in 2025, but it’s not active yet.
- Freelancers should evaluate whether opting out of VAT will benefit their business model once the option is available.