In summary: Anyone who is going to be self-employed must register their business with the tax authorities Before we begin, on the Finance Portal or at a tax office. On the declaration, you state your business activity, your projected turnover for the rest of the year and your bank account details, and you are assigned a VAT and personal income tax scheme. Anyone who expects to generate turnover of up to 15 000 € per year may be exempt from VAT, and Social Security only levies contributions from the 12th month.

When and where does the activity take place?

The declaration of commencement of business must be submitted before the business commences (Article 112 of the Income Tax Code and Article 31 of the VAT Code), no later than the date specified as the date of commencement. There are two ways to do this:

on the Finance Portal, under ‘Activity’, ‘Submit returns’, using your tax identification number (NIF) and password, your Citizen Card or your Digital Mobile Key;
in person, at a tax office or a Citizen’s Bureau, by means of a verbal declaration made by the individual themselves.

Anyone who chooses to keep organised accounts, or is required to do so, must submit their tax return through a certified accountant.

What is stated in the declaration

The activity: the table code set out in Article 151 of the Personal Income Tax Code (e.g. consultants, programmers, designers, architects) or the CAE code, for commercial and industrial activities.
Projected turnover for the remainder of the year. It is this figure that determines the VAT regime at the outset.
The bank account, using the IBAN, in the payer’s own name.
The VAT system: exemption or standard scheme, quarterly or monthly.
The personal income tax scheme: the simplified scheme, as a general rule, or organised accounting, by choice.

VAT: exempt or not

Anyone expecting to generate turnover of up to €15,000 in a year may be exempt from VAT (Article 53 of the VAT Code): they do not charge VAT to customers or submit periodic returns. If your turnover exceeds €15,000 but remains below €18,750, you must submit a declaration of changes within the first 15 working days of the following year and switch to the standard scheme on 1 January. If your turnover exceeds €18,750 during the year, you must start charging VAT immediately. Under the standard scheme, returns are submitted quarterly, or monthly for turnover of €650,000 or more.

IRS: simplified scheme or organised accounting

For annual income of up to €200,000, the self-employed person is subject to the simplified scheme: income tax is levied as a percentage of their turnover, 75% for professional activities under Article 151, with a reduction in the first few years. Anyone wishing to use the organised accounting scheme, in order to deduct actual expenses, may opt for it by submitting a declaration of changes by the end of March. To compare the two schemes using your own figures, use the simplified tax regime simulator or organised accounting.

What happens next

Invoice-receipts (‘green receipts’): these are issued via the Finance Portal or the ATGO app, and are therefore immediately reported to the Tax Authority.
Social Security: The AT is notified of the start of business, and the classification only takes effect on the first day of the 12th month following that date. From then on, the quarterly return must be submitted by the end of January, April, July and October.
Pay-as-you-earn tax: Customers with organised accounts must withhold 23% on activities covered by Article 151. Those who expect to invoice less than €15,000 per year may apply for an exemption, indicating this on the invoice-receipt.
Annual income tax return: Form 3 must be accompanied by Annex B and submitted between 1 April and 30 June of the following year.

Change or cease trading

Any changes to the details provided (business activity, VAT scheme, address) must be reported within 15 days. Cessation of business must be declared within 30 days of the date on which the business ceased trading. Anyone switching from one business activity to another must submit a declaration of changes rather than a declaration of cessation.

Frequently asked questions

Can I set up my own business and continue working for someone else?

Yes, you can. The income from both jobs is added together for income tax purposes. As regards social security, anyone who is also an employee may be exempt from contributions as a self-employed person, subject to the conditions laid down by law.

What if it’s just a one-off job?

For a one-off service that will not be repeated, you can carry out a one-off transaction rather than registering a business. Read our guide on isolated incident.

The role of Serro & Andrade

We set up your business with the correct VAT, income tax and social security codes and schemes, handle your quarterly and annual returns, and let you know when there’s a change to the scheme. Read the guide too simplified scheme or organised accounting and the guide Limited company or sole trader, or get in touch with us.