Spain’s Failure to Implement the EU VAT Franchise Scheme: Another Blow to the Self-Employed

Spain’s Failure to Implement the EU VAT Franchise Scheme: Another Blow to the Self-Employed

The situation faced by thousands of self-employed workers in Spain is a genuine tax scandal. While our European neighbours routinely apply the special VAT exemption scheme established by Council Directive (EU) 2020/285 of 18 February 2020, Spain has still not transposed this measure into national law, even though it should have begun to apply on 1 January 2025. This failure could lead to sanctions by the European Union, but the most serious issue is the direct and immediate harm it is already causing small taxpayers.

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 do not exceed a specified turnover threshold.

Specifically, it provides for:

• An annual turnover threshold of up to €85,000, below which businesses may benefit from the VAT exemption.

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

Why is Spain not applying it?

Once again, the Spanish Administration has failed to meet its obligation to transpose an EU directive on time. This is not a mere technical omission but clear legislative neglect that is seriously affecting a group representing more than three million people in Spain: self-employed workers.

At present, Spain has no VAT franchise scheme. This means that even self-employed workers with minimal income must charge, declare and pay VAT quarterly, while bearing the administrative costs and a disproportionate tax burden.

Consequences for self-employed workers

• Unnecessary bureaucracy: quarterly returns, VAT books and other formalities.

• Indirect costs: the need to hire tax advisers and time spent on administrative procedures.

• Unfair competition with peers in other EU countries.

Comparison with other Member States

• France: a threshold of €91,900 for commercial activities and €36,800 for services. The franchise scheme applies automatically.

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

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

The situation in Spain is simply indefensible.

Risk of EU sanctions

The European Commission has repeatedly warned that Spain is in breach of its obligation to transpose this Directive. If a Member State fails to meet its obligations, Article 258 of the Treaty on the Functioning of the European Union (TFEU) allows infringement proceedings to be initiated, which may lead to a ruling against the State by the Court of Justice of the European Union (CJEU) and financial sanctions.

Conclusion for consumers

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

• Raises the cost of accessing local services.

• Reduces the competitiveness of the domestic market.

• Affects consumer choice and purchasing power.

Ultimately, this decision negatively affects both the productive sector and citizens’ wallets. Immediate transposition of the Directive is not merely a technical or tax issue: it is a matter of economic and social justice for everyone.