SELF-EMPLOYED REGISTRATION (CHAPTER 1) – BUSINESS ACTIVITY MAIN & REGULAR TAX DECLARATIONS DURING THE YEAR

Spanish tax year in Spain generally goes from January to December every year.

Everyone trading in Spain will be obliged to be VAT registered except than the actual business activity is VAT exempted (i.e. business associated with health, education, house rentals, ..).

It is very important to the business owner to understand that VAT tax is always NEUTRAL between business activities. This is an indirect tax over consume, and business trading companies will always be able to consider themselves neutral as they will have the right to compensate the VAT to pay against any VAT that they paid during their day-to-day business trading or business assets being purchased, and VAT affected. So that, for instance, a business registered trading company rendering services in the current market related with i.e. car maintenance and repairs, and charging and collecting VAT from their clients will always be able to compensate the VAT to pay each quarter to the Spanish authorities from the VAT paid in all spare parts, and products that they need to develop the business activity itself. So that, VAT is never a cost to the business as it is to the final consumer.

Tax year in Spain is divided in 4 natural quarters. Everyone business registered is normally obliged to present different tax declarations depending their business activing, and their source of earnings in the end of every period. First quarter ends 31.03, Second quarter ends 30.06.XX, third quarter ends 31.10.XX, and forth quarter ends 31.12.XX along the year. Tax declarations must get submitted by the 20th of the following month from the end of every quarter. So that, 20.04.XX, 20.07.XX, 20.10.XX and 20.01.XX+1 (following year).

Every time that a business gets registered, should the business owner inform both the Inland Revenue and the Spanish Labour Services prior to consider self-employed activity fully registered in time.

At the time the Inland Revenue gets informed, should the business owner tick on every box that he/she will be considered obliged to submit information to the tax office, or pay tax in this concept.

It is important to say that Spanish tax office will look at one particular action done during the year as a business eventhoug the person who runs it does not. Very often happening, people rent their house out temporarely during the year, or participate in once-in-the-year transaction (i.e. commission) that makes him/her think not to consider necessarely to inform the tax office until the year ends, and it usually causes problems due not to understand the concept of “business” as the same way as the Inland Revenue does. In order to avoid any fines, it is very important that the business owner gets familiar with the tax forms, and the time in the year that he/she gets obliged to submit information or pay tax.

These are generally the most common tax declarations that a business owner will be liable to submit every quarter:

TAX FORM 111

It gets paid every quarter, and it means every tax taken at source by the business owner, and to be paid on behalf of a third party; generally employees, and proffessional services rendered (architects, Chart. Accountants, Solicitors, …).

Upon the event that no invoices meant any tax retentions at source during one particular quarter, business owner will still be obliged to submit this tax declaration anyway in order to avoid any fines from the Inland Revenue Service (IRS = AEAT).

Annual informative tax declaration associated to this tax declaration is TAX FORM 190, and it gets presented together with the forth quarter declarations in January to the following year. It lists particularly and individually each one being taxed at source during the year.

(Continue reading chapter 2, 3, and 4)

Our Firm will be able to assist you from the initial idea of setting up a business in Spain until the business is registered at all public authorities (i.e. Inland Revenue, VAT Department, Income Tax Department, Social Security Department, etc) and all licenses are applied for at the relevant public offices (i.e. Hygiene Licenses, registration of any qualifications for trading, vehicle registration in the name of the business, etc).

In case of being in partnership with other different people or being in cooperation with other companies in the same business sector, we will help you with preparing collaboration working agreements which should specifically detail each one of the members responsibilities in such transaction or joint-working agreement and each one of the members revenue for such work in common.

In case of being the needs of negotiating a tenancy agreement with the owner/landlord of a commercial unit where you reckon your business will be successful, our Firm will guide you with these negotiations in order to save you as much as possible in terms of costs (i.e. free rental monthly periods until the business is established and opened, not bank guarantees liabilities, longest possible tenancy period needed to compensate the initial investment, etc).

After the business is set up and registered, our Firm will manage with keeping your books and accountancy and will make sure you personally and your business fulfil all formal and tax liabilities in order to keep away from you any problems with any competent authorities related to any of the fields where your activity trades in. This will obviously require regular meetings and contacts with our Chartered Accountants working in our office that we have located in the Coast of Spain and will require full explanations of different matters important to be completely understood.

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