Modelo 303: The Quarterly VAT Return for Freelancers With Foreign Clients

The idea

VAT is collected in stages. You charge it on your sales (output VAT), you pay it on your business purchases (input VAT), and each quarter you pay the difference to the tax agency or carry forward a credit. Form 303 is where that sum is done.

The standard rate is 21 %. Some activities are exempt, such as most healthcare and regulated teaching, and an exempt activity cannot recover input VAT.

Invoices without Spanish VAT

A freelancer whose clients are abroad may issue every invoice without VAT and still have a great deal to report:

• Services to businesses in other EU countries are reported as intra-Community supplies of services. They also go on form 349, and you must hold an EU VAT number.
• Services to businesses outside the EU are reported as transactions not subject to Spanish VAT because of the place-of-supply rules.
• Services to Spanish clients carry VAT in the ordinary way.

Reporting them matters even though no tax is paid: these boxes are how the tax agency reconciles your VAT return with your income tax and with the statements filed by your EU clients.

The reverse charge

When you buy a service from a supplier abroad, for example advertising, cloud software or a subcontractor in another country, the invoice normally arrives without VAT. You then act as if you had charged yourself: the VAT is declared as output tax and, if the cost relates to your taxable activity, deducted as input tax in the same return. The net effect is usually nil. Omitting it is still an error.

Recovering input VAT

A freelancer who charges no Spanish VAT because the clients are abroad can still recover the VAT on business costs: the right to deduct follows the nature of the activity, not the location of the customer. The result is often a return with a credit. During the year the credit is carried forward; in the last quarter it can be claimed as a refund.

Returns are due in the first twenty days of April, July and October, and by 30 January for the fourth quarter, followed by the annual summary, form 390.

The return in plain terms

The form is long, but a freelancer with clients abroad uses a handful of its sections:

• VAT charged on Spanish sales, by rate.
• Intra-Community acquisitions and reverse charge: the VAT you self-assess on services bought from abroad.
• Deductible VAT on domestic costs, on imports and on those same reverse-charge purchases.
• Informative boxes for intra-Community supplies of services and for sales not subject to Spanish VAT under the place-of-supply rules.
• The result: to pay, to carry forward or, in the last quarter, to be refunded.

What appears in the informative boxes during the year has to agree with form 349 and with the annual summary. A mismatch between them is the usual trigger for a query.

Errors that are easy to make

• Leaving the informative boxes empty because no tax arises from them.
• Deducting VAT from a foreign invoice that showed none.
• Deducting 100 % of VAT on items used partly privately.
• Asking for a refund every quarter: outside the monthly refund scheme, it is only available in the last return of the year.
• Carrying a credit forward for more than four years, after which it is lost.