Tax and National Insurance when you are self-employed

Every self-employed worker is subject to a series of obligations with the State. These include the delivery of the VAT collected or registration with both the Social Security and the Treasury. The procedures that must be carried out are essential to maintain a legal and regularized activity. What obligations are the most important?

Tax and labour obligations

Self-employment is subject to a series of mandatory regulations. These allow any work to be carried out in suitable conditions, as well as protecting the worker. In addition, its compliance avoids the imposition of fines or other sanctions. Some of the most important are the following.

Registration in the Treasury and Social Security

Both are essential to get started. Registration with Social Security must be done 60 days before beginning the activity. Thus, the professional will be registered in the RETA (Special Regime for Self-Employed Workers). Likewise, he will do the same in the census of business people, professionals and withholdings of the Treasury, following the period above of time.

VAT collection

The services and products marketed by the majority of freelancers are subject to VAT. The amount varies depending on the activity carried out and may even be exempt. The tax payment is accrued and must be delivered quarterly (form 303 in April, July, October and January), in addition to an annual summary (Form 390).

Along with this, the worker will have to keep the supporting documents for the applied indices or modules in case of paying taxes under the simplified VAT system. Otherwise, it is necessary to keep a record book of invoices issued, a record of invoices received, another for the record of investment goods and a record of certain intra-community operations, depending on each case.

Personal income tax

The calculation of this tax must be decided when registering with the Treasury. There are two modalities: direct and indirect estimation. The first involves paying quarterly taxes on the income obtained from the activity after deducting deductible expenses (Form 130). In the second, depending on the activity, a series of indices or modules are applied, and payment is also quarterly (Form 131).

Is it necessary to register with the RETA if less than the minimum interprofessional salary is charged?

This is a highly disputed issue since it is not fully clarified in the various laws and decrees governing this work form. The usual exercise of income governs the criterion that has been followed until the end of 2021. If these exceed SMI in a calendar year, it is mandatory to register with the RETA, which will lead to the payment of the monthly Social Security contribution.

However, in early 2023 a reform will be applied to the system that will make the self-employed contribute based on their income. This led to the creation of 13 tranches so that the current criteria could change.

Ultimately, these are the essential obligations of the self-employed. We must respond to them to work by current laws. In addition, it is necessary to register for the RETA to qualify for the retirement pension.