Self-employed by modulos: what is it and how much do you pay?
The contribution of a self-employed person by modulos, or objective estimation, is a system that the State allows in certain cases. We indicate when it is possible and the advantages it brings.
What is a self-employed person by Modulos?
Most self-employed persons pay personal income tax based on their income and, ultimately, on the income they generate.
In contrast, the objective estimation system or modulos system works differently: certain objective scales are taken into account, such as the square metres of the premises, electricity consumption or the number of workers.
Obviously, these modulos can be updated depending on what the government decides.
But they have the advantage that they are fixed regardless of what is invoiced, which may be of interest in certain cases.
In which activities is the modulo system accepted?
It should be noted that not all self-employed professional activities accept the module system. Traditionally, it has been applied to self-employed people with small shops or businesses with premises. The conditions that have to be met are as follows:
- A certain level of income cannot be exceeded (excluding VAT, equivalence surcharge, compensation and subsidies). For example: for generic activities it is 125,000 euros, for those where an invoice has to be generated it is 75,000 euros and, in the agricultural sector, it is 250,000 euros. There has been a substantial reduction, from 2023, with respect to the previous limits.
- The professional activity has to be carried out 100% in the spanish territory. If you invoice outside Spain, you will not be able to pay tax under the module system. In order to operate outside Spain, a series of additional formalities must be carried out.
- To pay VAT under the simplified VAT system (or equivalent figures in the Canary Islands, Ceuta and Melilla).
- The activity must be specifically recognised by the Ministry of Finance as eligible for this system.
Some of the activities that can be taxed by modules are the hotel and catering trade (up to 2 stars), cafés, hairdressers, agriculture and livestock, bakeries, patisseries, retail shops, electricians, shoemakers, taxi drivers, hauliers, couriers and copyists.
How much does a self-employed person pay by modules?
As with the conditions, there are also fixed personal income tax rates. In this case, they will be calculated on the gross profits declared.
These are: 4% of the quarterly income as a generic payment, which is reduced to 3% if you have an employee and 2% if you have none.
This implies a detailed calculation of income, especially if there are changes in the workforce.
This is therefore a taxation system which, despite the restrictions it has undergone, is designed for the self-employed and micro-enterprises.
A self-employed person without employees or a small business may be interested in this option, because they will pay less.
Módulos 2024
Modulos reduction 2024
If you are a module taxpayer, you should know that at the end of last year the order that develops this special regime for 2024 was published.
This year, by applying this regime, you will be able to reduce the net yield of your activity by the following percentages:
- In general, by 5% of this net income (in 2023 this reduction was 10% and in 2022, 15%).
- And if you carry out agricultural and livestock farming activities, you will be able to apply an additional reduction of 35% of the purchase price of agricultural diesel and 15% of the purchase price of fertilisers.
Limits of the Modules 2024
On the other hand, in order to apply this regime, the sales and purchases limits existing in previous years have been extended for another year:
Concept Amount
Total sales 250,000
Sales to entrepreneurs 125,000
Purchases (not fixed assets) 250,000
Volume of operations carried out in the previous year.
Waiver of the modulos in 2024
If you wish to renounce the modules for 2024, you can do so by filing a census return until 31 January 2024 or, tacitly, by filing the VAT return for the first quarter of 2024 under the general system (form 303) and the payment on account of personal income tax under direct estimation (form 130).
CALCULATE THE MODULUS FIRST
When a natural person is going to start a business, it is useful to do the maths to find out which taxation system is best for him/her…
You are going to start an economic activity as an individual, and when registering with the tax authorities, your manager has told you that you can pay personal income tax under the direct assessment system (real income minus real expenses) or under the module system (in which you are taxed according to an amount pre-established by the tax authorities, regardless of the economic result of the activity).
It is advisable not to be too hasty in opting for one system or the other:
Sometimes it is assumed that, as the initial profits are not very high, it is better to be taxed under the direct assessment system.
Beware! But this is not always the case.
In other cases, the module system is preferable because of its convenience.
But this convenience can be costly, as sometimes the objective estimation means higher taxation.
Guidelines before registering in Modulos
Before making a decision, ask your manager to make a prior calculation of the profits to be declared in the next three years under both systems (based on a reasonable forecast of income and expenses).
In any case, here are some hints:
If the expected profits are very low, or you even foresee losses, direct estimation will probably be the best option.
If your profits are high from the start (higher than the return derived from the modules), but you are going to make investments and hire staff, direct estimation will also be, in general, the best option.
You will be able to apply the incentives linked to investment with job creation, which are not applicable to the modules.
If the profits are high (higher than those derived from the modules) and you do not make investments, the objective estimation will be more favourable.
Three years of taxable income
If the best option is the modules, you will not have to say anything when registering with the tax authorities (as they are applied automatically, unless you renounce).
But if you prefer the direct estimation, you will have to expressly renounce the modules, and you will not be able to return to them for a minimum period of three years.
That is why it is important to make the projection with the forecasts for the first three years!
