Spain, VAT for the Self-Employed and the EU Directive the State Has Yet to Implement

Spain, VAT for the Self-Employed and the EU Directive the State Has Yet to Implement

For months, a claim has been repeated that calls for a more precise legal explanation: that the European Union allows self-employed people with annual turnover below €85,000 to be exempt from VAT, and that Spain has yet to apply this option. This is not a minor issue. It is neither a simple political promise nor a marginal technical debate, but a matter of transposing EU law that has already prompted formal action by the European Commission.

The relevant measure is Directive (EU) 2020/285 on the special VAT scheme for small enterprises. It required Member States to adopt national measures by 31 December 2024 and apply them from 1 January 2025. Among other things, it allows each Member State to introduce a VAT exemption scheme for small businesses, with an annual turnover threshold no higher than €85,000.

However, it is important to avoid oversimplification. The Directive does not necessarily require every Member State to introduce a general domestic VAT exemption for its small businesses. It does require the new European framework to be transposed and, in particular, the necessary arrangements for businesses established in one Member State to use the exemption scheme, where applicable, in other EU countries that have introduced it. This is one of the main gaps in Spain’s legislation.

In an official parliamentary response in September 2025, the Spanish Government itself acknowledged that Spain had not planned to introduce the exemption scheme for transactions carried out in Spanish territory. It also acknowledged that the legislative change needed to allow businesses established in Spain to opt into the scheme in other Member States through the Spanish tax administration remained pending. That response made clear that the matter was not settled: transposition was incomplete or had not been completed.

The legal consequences have been serious. On 10 March 2026, the European Commission decided to refer Spain to the Court of Justice of the European Union for failing to transpose two VAT directives, including Directive (EU) 2020/285. The Commission considers the steps taken by the Spanish authorities insufficient and has even requested financial penalties. This is no longer just a political or academic criticism: the alleged failure has entered the EU litigation phase.

Against this backdrop, parliamentary negotiations have come to the fore. Junts has included implementation of Directive 2020/285 among its tax demands, so that self-employed people with annual turnover below €85,000 could be exempt from charging VAT. Reports indicate that Junts’ support for the Government’s anti-crisis decree was tied to a political commitment by the PSOE in that direction. But the distinction is important: as of today, that commitment is not yet a fully approved law in force.

The distinction matters. The anti-crisis Royal Decree-Law approved on 20 March 2026 includes tax reductions on energy and fuel, among other measures, but it does not contain a general VAT exemption for self-employed people with turnover below €85,000. For now, there are political negotiations and parliamentary initiatives without immediate legislative effect. In other words, there may be a serious political promise, but Spanish self-employed people do not yet have an established right to claim the exemption.

From a tax perspective, introducing a domestic VAT exemption could have a major practical impact. It would reduce formal obligations, simplify compliance for thousands of small professionals, and ease cash-flow pressure in low-margin activities. There are significant trade-offs, however: businesses using the scheme would not charge VAT and, in principle, would not deduct input VAT either, so it would not benefit everyone. For businesses with substantial investment or deductible costs, exemption could even be less favourable than the standard regime. That is why the debate needs to be handled carefully, without slogans.

The conclusion is clear. Spain cannot remain in an ambiguous position. If it does not intend to introduce a broad domestic exemption scheme, it should at least complete the transposition required by EU law without further delay. And if policymakers have opened the door to a VAT exemption for small self-employed businesses, they should move beyond rhetoric, pass clear legislation, and explain its actual effects honestly: who benefits, who does not, and under what conditions. In tax matters, legal uncertainty often costs more than the reform itself.

Spanish original: El IVA de los autónomos vuelve al centro del debate: compromiso político sí, reforma aprobada todavía no