The main concern of a self-employed These are the taxes they have to pay, and the fact is that these self-employed workers have to meet a number of recurring tax obligations. No self-employed person wants to be in debt to the tax authorities or to Social Security, but What taxes will they have to pay in 2023?
First of all, let’s clarify the concept of a self-employed person. A self-employed person is defined as a natural person who, on a regular, personal and direct basis, carries out an economic activity on a self-employed basis for profit. The main characteristic of these people is that they are not bound by any kind of contract.
They are self-employed and usually have staff working for them, as well as running a business open to the public. And of course, as they are not employed by anyone, they have to pay certain taxes to the tax authorities and Social Security. In Educa.Pro, we’ll take a look at these taxes and examine them in detail.
Value Added Tax, VAT
The VAT It is a tax added to the value of any goods, services or imported goods. If, as a self-employed person, you offer services or products, you must include this VAT on your invoices so that you can then settle your accounts with the tax authorities.
However, the settlement is calculated using the the difference between the VAT charged on sales invoices and the VAT paid on purchase invoices in order to complete the task. How often do you have to pay VAT? It’s paid quarterly.
How much income tax will a self-employed person pay in 2023?
The Income Tax consists of a tax on the income for individuals, which also applies to the self-employed. Ultimately, it is a matter of being taxed on the income you earn. Thus, personal income tax is the same for everyone, depending on each person’s income bracket. The more money you earn, the more personal income tax you will have to pay.
The first thing we should point out is that in Spain we have the the flat-rate scheme or module-based scheme. Here, income tax is calculated on the basis of objective criteria such as the square metres of the premises or the number of kilometres travelled by the vehicle. This is why only certain types of business can be taxed under the ‘modules’ system; self-employed individuals with a turnover exceeding 250,000 euros are never eligible for this system.
If we look at the standard income tax deductions, in 2023 we find the following: brackets based on turnover:
- A 19% withholding tax (%) applies to those with an annual turnover of up to 12,450 euros.
- A 24 % withholding tax will apply to those earning between 12,450 and 20,200 euros.
- A 30 % withholding tax for those earning between 20,200 and 35,000 euros.
- A 37% withholding tax (%) for those earning between 35,000 and 60,000 euros.
- A 45 % withholding tax for those with a turnover of between 60,000.01 and 300,000 euros.
- A 47 % withholding tax for those earning over 300,000 euros.
Self-employed contribution rates in 2023
To become a fully-fledged self-employed person, you first need to register with the RSpecial Scheme for Self-Employed Workers (RETA). Signing up means you’ll have to pay a monthly fee known as self-employed contributions. You will have to pay this fee from the very first day you start your business.
One of the key factors in this regard is that the contribution base It determines not only the amount you pay, but also the benefits a self-employed person is entitled to. In other words, depending on your contribution base, you will be entitled to certain benefits rather than others in the event of retirement, accident-related absences or illness or cessation of work.
With effect from 1 January 2023, a contribution model for the self-employed. This is a progressive model that will remain in force for three years, from 2023 to 2025. During this period, those who pay the least will see their contributions fall, whilst those who earn the most will see theirs rise.
These are the The 15 contribution bands for the self-employed:
Bracket Minimum contribution base 2023 () Contribution 2023 () Up to 670 751.63 230 Between 670 and 900 849.67 260 Between 900 and 1,166.70 898.69 275 Between 1,166.70 and 1,300 950.98 291 Between 1,300 and 1,500 960.78 294 Between 1,500 and 1,700 960.78 294 Between 1,700 and 1,850 1,013.07 310 Between 1,850 and 2,030 1,029.41 315 Between 2,030 and 2,330 1,045.75 320 Between 2,330 and 2,760 1,078.43 330 Between 2,760 and 3,190 1,143.79 350 Between 3,190 and 3,620 1,209.15 370 Between 3,620 and 4,050 1,274.51 390 Between 4,050 and 6,000 1,372.55 390 6,000 or more 1,633.99 420
Which expenses are deductible for income tax purposes?
You’ve no doubt heard the phrase ‘I can claim this back from the tax office’ a thousand times, but…Which expenses can actually be claimed as tax deductions? You can claim tax relief on all expenses that form part of your professional activity and are directly related to it. In some cases, you’ll only need the receipt, whilst in others you’ll need a standard invoice.
Here’s a look at a list of expenses that you can claim as tax deductions. Mind you, bear in mind that it will depend on the type of work you do.
- Materials and raw materials.
- Fees for cards, accounts or transfers.
- Petrol.
- Diets.
- Computer.
- Printer, hard drive and other peripherals.
- Car.
- Transport, journeys or travel.
- Internet bill.
- Mobile phone bill.
- Your website domain, hosting and software licence.
- Administrative services.
- Car park.
- Training
- Professional clothing.
And what about Business Tax?
The IAE It is classified as a local tax, which means that it is administered and collected by the local councils in each municipality. This tax is levied on economic activities – whether professional, commercial or artistic – carried out within a municipality’s territory.
The tax is based on the economic capacity of the activity carried out and is determined according to various parameters, such as the specific activity, the size of the business, the income generated, etc.
The Key features of the IAE These include:
- Taxable Person: The person liable for the tax is the natural or legal person carrying out the economic activity. In other words, the taxpayer is the business owner, professional or organisation carrying out the activity.
- Fees and Headings: The IAE is organised into rates and categories corresponding to different types of activities. Each economic activity is classified under a specific category which defines the tax base and the applicable rate.
- Declaration and Payment: Taxpayers must submit a business registration form to their local council, setting out the economic activity carried out. The amount payable is then calculated on the basis of the rate and the taxable amount established for the relevant category.
- Exemptions and Concessions: There are exemptions and tax reliefs that vary according to the legislation of each local authority. Certain activities may be wholly or partially exempt from tax, and in some cases tax relief is granted to promote specific economic sectors.
- Settlement Period: In most cases, the IAE is paid annually, although there may be special arrangements for seasonal activities or other specific circumstances.
If you would like accurate information about the IAE in your country or region, I recommend that you consult your local tax authorities or tax professionals.
