Saturday, September 30, 2023

What is the proposed reform so that the self-employed do not pay VAT | Self-employed

Self-employed workers can stop using VAT on their invoices. The idea arose from Directive (EU) 2020/285, which allows member states to grant tax exemptions in relation to supplies of goods and services, if certain requirements are met. Therefore, a tax exemption will be granted in respect of goods and services.

New franchise system

As analyzed by Declarando in its Legal Observatory, the next VAT system aims to eliminate the module system, which may affect many self-employed workers who currently contribute under this regime. However, the new VAT exemption system may facilitate the transition to the direct assessment regime for personal income tax, which is the regime followed by most self-employed people.

This new regulation is still in the negotiation process, so it could be implemented between 2025 and 2027.

The CEO of Declarando, Marta Zaragozá, points out that the new VAT system “will voluntarily release self-employed workers who invoice less than 85,000 euros per year from their obligation to pay VAT every quarter .”

Deduction of VAT from activity expenses

Zaragozá added that those who take advantage of this new regime “will also not be able to deduct VAT from the expenses of their activity, therefore, as a volunteer, each self-employed person must check what is best for them.”

According to the CEO of Declarando, the criteria that any self-employed must check to benefit from the new system is their deductible expenses. In this sense, it clarifies that self-employed professionals with low costs associated with their activity “are the most likely to benefit from the Franchise Regime.”

Nation World News Desk
Nation World News Desk
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