As 2025 draws to a close, the fiscal landscape for Spain’s self-employed workforce has reached a point of no return. What began as a promise of administrative simplification has spiraled into an institutional three-way conflict involving the Spanish Government, associations representing the self-employed, and the European Commission.
The Executive branch, led by the Ministry of Finance, has definitively rejected parliamentary amendments seeking to introduce a “Zero VAT” regime for those with annual earnings under €85,000 within national territory. Instead, the government has limited the transposition of European regulations exclusively to sales made abroad. This decision has prompted organizations such as UPTA (Union of Professionals and Self-Employed Workers) to formally sever relations with the Tax Agency, alleging “fiscal persecution.” Simultaneously, Brussels has escalated the matter by issuing a “reasoned opinion”—the final step before dragging the country before the Court of Justice of the European Union.
A Legislative Door Slam
The Final “No” in Congress
During the final processing of the Budget and accompanying fiscal laws in November 2025, the last legislative battle to salvage the domestic VAT franchise regime was fought. The opposition People’s Party (PP) introduced specific amendments designed to force the Government to apply the franchise regime nationally, arguing that inflation and bureaucratic costs were suffocating micro-enterprises.
However, the ruling coalition rejected these proposals. The argument put forth by the Ministry of Finance has remained immovable: Directive (UE) 2020/285 permits Member States to apply the exemption, but it does not mandate it for internal operations. The Treasury has clung to the literal interpretation of the rule to block its application within Spain, prioritizing revenue capacity and fraud control over administrative simplification.
The Paradox of Forms 041 and 350
The refusal to apply the rule domestically has created a schizophrenic administrative scenario, materialized in two new forms that entered the public hearing phase late in the year:
- Form 041: Allows a Spanish freelancer to request VAT exemption when selling to a client in France or Germany.
- Form 350: A quarterly information return to verify that the €100,000 EU-wide billing threshold is not exceeded.
The result is that a plumber in Logroño will find it fiscally easier to provide services in Bordeaux than in his own city. Tax experts have labeled this situation a “technical absurdity,” noting that freelancers are forced to maintain the entire VAT liquidation structure (quarterly Form 303 and annual Form 390) for their daily domestic activity, while being offered a theoretical advantage for internationalization that, for micro-enterprises, is often anecdotal.
Brussels Loses Patience: The Sanction Procedure
While Spain debated internally, the European Union’s legal machinery has continued to advance. Spain’s inaction has placed the country in the crosshairs of the European Commission, the guardian of the Single Market’s rules.
From Warning to Real Threat
In the infringement package released in the second half of 2025, the European Commission hardened its stance. After sending letters of formal notice earlier in the year, Brussels has issued reasoned opinions directed at Spain, as well as other lagging nations like Romania and Greece. The Commission demands the complete and effective transposition of Directive 2020/285.
The conflict lies in the interpretation of the norm. While domestic application is optional, the Commission considers that the administrative barriers maintained by Spain—by lacking a franchise regime equivalent to that of its community partners—practically hinder foreign companies from operating in Spain under the same regime, potentially violating free competition. Spain now has two months to rectify the situation or face a lawsuit at the Court of Justice of the European Union (CJEU), carrying the risk of multi-million euro fines.
Revolt in the Sector: Severed Relations
The social climate between the self-employed and the tax administration has deteriorated to levels unseen in the last decade.
UPTA Walks Away
In a move with significant political weight, UPTA, traditionally open to dialogue with the coalition government, announced in November 2025 the suspension of its formal participation in the working group with the Tax Agency. Its president, Eduardo Abad, stated: “We are treated as suspects by default. Those with the fewest means are the ones being persecuted.” The organization claims that commitments to fiscal simplification have been systematically broken and that paralyzing the VAT franchise is “nonsense” that consolidates an unjustifiable fiscal gap relative to large corporations.
ATA and the “Fiscal War”
For its part, the National Federation of Self-Employed Workers Associations (ATA) has described the situation as a “fiscal war.” Its president, Lorenzo Amor, pointed out that Spain stands alone in Europe, denying its citizens a competitive advantage enjoyed by their Portuguese, French, or Italian neighbors. ATA warns that maintaining VAT obligations, combined with the imminent mandatory implementation of electronic invoicing (Verifactu), will impose an unaffordable cost on thousands of small businesses.
The Map of Competitive Disadvantage (Status as of Dec. 2025)
The “Spanish exception” becomes glaringly evident when observing the evolution of direct commercial partners over the last year:
Spain: Total Blockade (Cross-border only). Obligation to liquidate VAT from the first euro earned. High management costs.
Italy: Consolidated Regime Forfettario. Exemption up to €85,000. Flat tax of 15%. Resounding success in surfacing the underground economy.
Poland: Full Transposition. New exemption up to PLN 200,000 (~€46,000) effective since January 2025. Massive simplification.
Romania: Aggressive Reform. Threshold raised to ~€80,000 (RON 395,000) to combat evasion through simplification.
Portugal: Modernization. Maintenance of the exemption (Art. 53) and digital adaptation to facilitate cross-border trade.
The key data point: An Italian graphic designer billing €40,000 a year saves approximately €2,500 in management costs and does not charge VAT (making them 21% cheaper for private clients). Their Spanish counterpart must charge VAT and spend time and money liquidating it quarterly.
The Treasury’s Argument: Caution or Greed?
Why does Spain resist so vehemently? Ministry of Finance sources insist on two key points that have blocked the reform:
- Fear of “Fiscal Dwarfism”: The Treasury fears that setting an €85,000 threshold will incentivize companies to hide billing to avoid exceeding the limit, a phenomenon known as the “cliff effect.” They prefer to keep all operators within the VAT system to guarantee complete traceability of the economy.
- The Priority of Verifactu: The deployment of mandatory B2B electronic invoicing has become the flagship project of the fiscal legislature. The Treasury argues that it cannot manage two structural changes simultaneously and that, paradoxically, once Verifactu is fully operational (around 2026-2027), control will be so exhaustive that the franchise might be unnecessary or, conversely, easier to implement. However, for freelancers, this means years of waiting and a double administrative burden.
An Uncertain Future for 2026
As this report goes to press, the scenario for 2026 is bleak regarding administrative simplification in Spain. The Government’s refusal, armored in Congress, leaves Spain as a bureaucratic island on a continent moving toward deregulation for small economic activities.
The only hope for freelancers now lies, paradoxically, outside of Spain: in the pressure the European Commission can exert through ongoing infringement procedures. Until the CJEU hands down a sentence or the Treasury yields to the threat of fines, the Spanish freelancer will remain the only one among the major European nations forced to act as a tax collector for the State from day one of their activity.
