He fiscal year 2025 comes with news for workers self-employed with less income, who will be able get rid of having to present the Quarterly VAT thanks to the new figure of franchised VAT.
What does franchise VAT consist of?
He franchised VAT involves the implementation of European Union Directive 2020/285, which must begin to operate in January 2025.
This new regime will allow self-employed people who invoice less than 85,000 euros per year not to have to pay VAT quarterly or annually.
In other words, eliminates all VAT procedures for self-employed workers who do not exceed the billing limit.
In addition, they will not have to include VAT on their invoices, something that now only certain professionals can do.
Which self-employed workers can benefit from the franchised VAT?
Invoicing less than 85,000 euros is just one of the requirements to benefit from franchised VAT.
In reality, the European directive 2020/2085 It even allows you to exceed those 85,000 euros by 10% and up to 25% to reach 100,000 euros for companies that operate at intra-community level.
Advantages and disadvantages of franchised VAT
The pros of this new VAT regime are quite clear:
- You avoid having to submit and pay VATwith which you collect your administrative burden as a self-employed person. This saves time and worry, as well as possible fines for errors in the deducted VAT.
- Your services are cheapersince clients will not have to pay VAT. This advantage is clearer for freelancers who work with end clients. Companies can deduct input VAT. In any case, not having to pay VAT will always improve your cash flows.
- Simpler invoicesbecause they will not have to include VAT.
On the opposite side, the negative part of the franchised VAT is that input VAT is no longer deducted. With the current system, a self-employed person can deduct the VAT they have had to pay for the services they use, such as the internet or the equipment they buy to work.
When presenting the model 303 quarterly VAT declaration, what is done is subtract the VAT that the self-employed person has paid from the VAT that he has collected on his invoices. With the new model, input VAT can no longer be subtracted, although VAT will have to be paid for the services and purchases made.
This possibility of deducting VAT is one of the few tax advantages of being self-employed and the toll of having to act as a VAT collector for the State.
Is it worth benefiting from the franchised VAT?
This is the million dollar question. The system of franchised VAT It is not mandatory, but voluntary. Each self-employed person can decide whether or not they want to join the VAT with exemption.
In general, the new model It will benefit self-employed people with few expenses to deduct, such as lawyers, designers or advisors. For these self-employed workers, their own labor represents the highest cost and eliminating VAT will help them offer a more competitive price.
On the other hand, professionals who do need a lot of materials to work will lose the possibility of deducting taxes for them and the new system may not be worth it to them.