Spain Fails to Implement the VAT Exemption Scheme for the Self-Employed

Failure to transpose Directive (EU) 2020/285: another setback for Spain’s self-employed

Thousands of self-employed people in Spain face a serious tax burden. While other European countries apply the special VAT exemption scheme established by Council Directive (EU) 2020/285 of 18 February 2020, Spain has yet to transpose it into national law, although it should have applied from 1 January 2025. This failure could lead to EU sanctions, but its immediate impact on small taxpayers is already significant.

What does Directive 2020/285 provide?

The Directive amends Directive 2006/112/EC on the special scheme for small businesses. It aims to make life easier for small businesses and professionals by allowing them to operate without charging or paying VAT, provided they remain below a specified turnover threshold. In particular, it provides for:

• An annual turnover threshold of up to €85,000, below which businesses may qualify for VAT exemption.

• Greater harmonisation between Member States to facilitate cross-border trade.

Why is Spain not applying it?

The Spanish Administration has once again failed to transpose an EU directive on time. This is more than a technical omission: it is a legislative failure affecting a group of more than three million people in Spain—the self-employed.

Spain currently has no general VAT exemption scheme for small businesses. Even self-employed people with very low income must charge, report and pay VAT quarterly, taking on management costs and a disproportionate tax burden.

Consequences for the self-employed

• Unnecessary bureaucracy: quarterly returns, VAT books and related obligations.

• Indirect costs: the need to hire tax advisers and spend time on compliance.

• Unfair competition with counterparts in other EU countries.

Comparison with other Member States

• France: thresholds of €91,900 for commercial activities and €36,800 for services, with automatic application of the exemption scheme.

• Italy: the “forfettario” scheme provides VAT exemption up to €85,000.

• Germany: VAT exemption for businesses with annual turnover below €22,000.

Spain’s position is difficult to defend.

Risk of EU sanctions

The European Commission has repeatedly warned that Spain is failing to transpose this Directive. Under Article 258 of the Treaty on the Functioning of the European Union (TFEU), failure to meet its obligations may lead to infringement proceedings, a judgment by the Court of Justice of the European Union and financial sanctions.

Conclusion for consumers

Spain’s failure to apply Directive (EU) 2020/285 not only discriminates against the self-employed; it also:

• Raises the cost of accessing local services.

• Reduces the competitiveness of the domestic market.

• Limits consumer choice and purchasing power.

Ultimately, this decision harms both productive businesses and citizens’ finances. Transposing the Directive promptly is not merely a technical or tax issue; it is a matter of economic and social fairness.