VAT Franchise Regime 2025-2026: How It Works, Who Can Use It, and Why Spain Doesn't Apply It

#Franchised VAT: The complete guide for the self-employed in 2026

The VAT franchise regime is probably the most talked about (and misunderstood) tax change in recent years among freelancers and small businesses in Spain.

Can I stop paying VAT if I invoice less than 85.000€? Is it already in force? Is it convenient for me to join?

This guide tells you all about it with information verified and updated as of January 2026, based on official sources.

⚠️⚠️ Important Notice

There is a lot of misinformation on this topic. In this guide we rely exclusively on official sources: Agencia Tributaria, BOE, Ministerio de Hacienda and European regulations. Last update: January 2026.

#What is the VAT exemption regime?

#Simple definition

The VAT franchise scheme (also called VAT franchisee) is a tax system that allows self-employed individuals and small businesses with an annual turnover below a threshold (maximum 85.000€ according to the EU) to be exempt from passing on, declaring and paying VAT.

What does this mean in practice?

If you avail yourself of this regime:

✓You do not include VAT in your invoices - Your prices are the final prices
✓You do not file form 303 - Goodbye to the quarterly VAT return
✓You don't file form 390 - No annual summary return either
✓More liquidity - You do not advance VAT that you later have to pay

But there is a price:

✗You can't deduct VAT on your purchases - The VAT you pay to suppliers becomes just another cost
✗Growth limit - If you grow too fast, you lose the regime

#Current status in Spain: The verified facts

#🚨 Spain has NOT implemented the franchise regime at the national level

Let’s be clear with the facts:

Spain is currently the ONLY country in the European Union that has NOT implemented a VAT exemption regime for domestic transactions.

#Chronology verified

Date	Event	Source
2020	EU publishes Directive 2020/285, which ALLOWS (not obliges) states to establish a VAT exemption scheme	OJEU
31/12/2024	Deadline for states to transpose the directive	Directive 2020/285
January 2025	Directive enters into force in the EU. Spain does NOT apply it internally	AEAT
February 2025	The European Commission opens proceedings against Spain for not correctly transposing the directive	European Commission
November 2025	Treasury publishes a Draft Order (not approved yet) for forms 041 and 350, only for cross-border transactions	Ministry of Finance
January 2026	Forms 041 and 350 are still pending. There is no exemption regime for operations in Spain	Current situation

#Why has Spain not implemented it?

The proyecto de Orden de Hacienda (November 2025) is explicit:

“The small business franchise regime is an option of Directive 2006/112/EC that has not been incorporated by the Spanish legislator, opting for other simplified settlement and revenue measures such as the special simplified and equivalence surcharge regimes.”

Arguments of the Ministry of Finance:

Loss of revenue: Treasury considers that it would entail a significant reduction in revenue
Risk of tax fraud: According to their analysis, it could increase
Existing alternative regimes: They consider that modules and equivalence surcharge already fulfill similar functions

ℹ️📢 Criticism from self-employed associations

ATA (Federación Nacional de Asociaciones de Trabajadores Autónomos) denounced the Government before the European Commission in December 2025, arguing that this leaves Spanish self-employed workers at a competitive disadvantage. Lorenzo Amor, president of ATA, stated, “The Spanish self-employed are the only ones in the European Union that cannot benefit from the VAT franchise if they invoice less than 85,000 euros. “

#What CAN you do? Franchising for cross-border operations

#The only option available (when approved)

Although Spain does not apply the franchise regime internally, sí will allow Spanish freelancers to avail themselves of the regime in OTHER EU countries that have it implemented.

What does this mean?

If you sell services or products to customers in France, Germany, Italy or other EU countries that are franchised, you may not be able to charge VAT on those specific transactions.

#Requirements (according to the draft Order, pending approval)

Requirement	Details
Turnover limit	Your annual volume of transactions in the EU cannot exceed 100,000 euros
Form 041	You must submit it to apply for the scheme in other Member States
Form 350	Quarterly informative declaration of the Community volume of transactions
Cross-border operations only	NOT applicable for sales within Spain

⚠️⚠️ Important: It is not yet approved

The draft Order regulating models 041 and 350 has been in the public hearing phase since November 2025. It has NOT yet been published in the BOE and could undergo modifications.

#Who is it useful for?

Profile	Are you interested?
Designer working only for Spanish clients	❌ Not applicable
Consultant with clients in France and Germany	✅ Could benefit (when approved)
Online store selling to all of Europe	✅ Could benefit (when approved)
Freelance programmer with clients in the USA	❌ Not applicable (outside the EU)
Freelancer who only invoices in Spain	❌ Does not apply

#If franchised VAT existed in Spain: Would it be convenient for you?

Although as of today it is not available for operations in Spain, it is useful to understand the analysis for:

Be prepared if it is eventually implemented
Evaluate whether you are interested in operations with other EU countries

#👍 When would VAT franchised be convenient for you?

1. You have few deductible expenses

Example: You are a consultant, coach or trainer working from home.

Concept	No franchise	Franchise
Gross income	50.000€	50.000€
VAT charged (21%)	+10.500€	0€
Expenses with deductible VAT	3.000€ (VAT: 630€)	3.000€ (VAT: 630€ not deductible)
VAT payable to Treasury	10.500€ - 630€ = 9.870€	0€
Additional cost (non-deducted VAT)	0€	630€
Net result	You pay 9.870€	You pay 630€ of additional cost

Conclusion: If your expenses are low, the savings are significant.

2. Your customers are end consumers

If you sell to private individuals (B2C) who cannot deduct VAT:

You can offer more competitive prices by not including VAT
Or keep the same final price and increase your margin

3. You want to simplify your administrative management

Tax obligation	General regime	Franchise
Quarterly Form 303	✅ Obligatory	❌ No
Annual Form 390	✅ Compulsory	❌ No
Input VAT control	✅ Required	❌ No
VAT registration books	✅ Required	❌ No

#When would VAT franchise NOT be convenient for you?

1. You have a lot of deductible VAT expenses

Example: You are a photographer and constantly buy equipment.

Concept	No franchise	Franchise
Gross income	60.000€	60.000€
VAT charged (21%)	+12.600€	0€
Equipment purchases (net)	20.000€	20.000€
Deductible input VAT	4.200€	0€ (non-deductible)
VAT payable	12.600€ - 4.200€ = 8.400€	0€
Actual additional cost	0€	4.200€

Conclusion: In this case, the savings would be 8.400€ - 4.200€ = 4.200€. It still pays off, but much less.

If your purchases were 40.000€:

Input VAT: 8.400€
VAT to be paid (general system): 12.600€ - 8.400€ = 4.200€
With exemption: 0€ VAT but 8.400€ additional cost
Net loss: 4.200€ → It would NOT suit you

2. Your customers are businesses that need to deduct VAT

If you sell to businesses (B2B), they may prefer suppliers who invoice with VAT in order to deduct it.

Actual example:

You are a freelance designer
An agency asks you for a project
With VAT: You invoice them 1.210€, they deduct 210€
With franchise: You invoice them 1.000€, they don’t deduct anything

Although the final cost is the same for them, some companies prefer VAT invoices for accounting reasons.

3. You have aggressive growth plans

According to European regulations, once franchised your turnover cannot grow more than 10-25% per year (the exact percentage is decided by each state).

#Quick formula: would it suit you?

Step 1: Calculate your current VAT payable

VAT due = (Income × 21%) - (Expenses with VAT × 21%)

Step 2: Calculate the additional cost with deductible

Additional cost = Expenses with VAT × 21%

Step 3: Compare

If…	Then…
VAT payable > Additional cost × 2	✅ You would be better off with the franchise
VAT to be paid ≈ Additional cost	⚠️ Please analyze on a case-by-case basis
VAT to be paid < Additional cost	❌ Would not be convenient for you

#FAQ (Frequently Asked Questions)

Is the VAT franchise already in force in Spain?

No. As of January 2026, Spain has NOT implemented the VAT franchise regime for domestic operations. There is only a draft Order (not yet approved) to allow Spanish self-employed persons to take advantage of the regime in other EU countries.

When will it come into force in Spain for domestic operations?

There is no scheduled date or guarantee that it will be implemented. The Ministry of Finance has explicitly opted not to incorporate this regime, arguing that other simplified regimes already exist.

Is it mandatory for Spain to implement it?

No. Directive 2020/285 ALLOWS member states to establish the franchise regime, but does not REQUIRE them. Each country decides whether to apply it and with what limit (up to a maximum of 85.000€).

What dossier has the European Commission opened against Spain?

The EU opened proceedings against Spain in February 2025 for not correctly transposing Directive 2020/285, especially regarding the regime for cross-border (non-domestic) transactions. This does not mean that Spain is obliged to apply the national regime.

What about forms 041 and 350?

These models are regulated in a draft Order that the Treasury submitted for public hearing in November 2025. As of January 2026, have NOT yet been definitively approved nor published in the BOE.

Can I use the module regime in the meantime?

It depends on your activity. The objective estimation regime (modules) is available for certain activities with specific turnover limits. For 2026, the Government has extended the current limits. Consult with your manager.

What is the difference between VAT exemption and VAT exemption?

VAT exemption (art. 20 VAT Law): applies to certain activities due to their nature (healthcare, education, etc.), regardless of turnover.
VAT exemption: Depends on turnover, not on the type of activity.

What if I invoice too little?

If franchised VAT were available in Spain, it would be mandatory regardless of how much you bill if you meet the threshold requirements. However, since it is not implemented, you must continue with the general VAT regime or the module regime if it applies to your activity.

#Current Alternatives: What You Can Do Today

#1. Optimize your current VAT

Deduct all possible expenses: Check if you have undeducted professional expenses
Mixed expenses: If you work from home, you can deduct a percentage of VAT on supplies
Invoices received: Make sure you have invoices for all your business expenses

#2. Consider the module regime (if applicable to your activity)

If your activity is included in the Modules Order:

Aspect	Direct Estimation	Modules
Calculation of the profit	Income - actual expenses	By fixed parameters
Accounting complexity	High	Low
Ideal for	High/Variable Expenses	Low/Stable Expenses

#3. Digitize your invoicing with Verifactu

Regardless of the VAT regime, the Verifactu regulation is moving forward (after the deferral approved in December 2025):

1 January 2027: Mandatory for companies subject to corporate income tax (SL, SA, etc.)
1 July 2027: Mandatory for self-employed and other taxpayers

#How BeeL.es helps you with VAT

With BeeL.es, managing your VAT is easier, whatever regime you’re in:

✓Automatic invoices with correct VAT: Configure the VAT rate and it is applied automatically
✓Quarterly summary for form 303: Your data ready to declare
✓Control of input VAT: Register your expenses and be clear about how much you can deduct
✓Compatible with Verifactu: Comply with the regulations from day one
✓Deadline alerts: Never forget April 20, July, October or January 30 again.

#Simplify your invoicing today

Starts with BeeL.es

#Checklist: Summary of key points

✓Franchised VAT is NOT in force in Spain for domestic operations
✓Spain is the only EU country without this regime domestically
✓Directive 2020/285 ALLOWS (not obliges) states to implement it
✓Forms 041 and 350 are not yet approved (draft in the pipeline)
✓When approved, they will only serve for operations with other EU countries
✓The limit for cross-border transactions is 100.000€ (not 85.000€)
✓If your expenses are low, it would suit you (if it existed)
✓If your expenses are high or you sell to companies, probably not
✓ATA denounced the Government before the European Commission (December 2025)
✓In the meantime: optimize your current VAT and comply with Verifactu.

#Summary: The basics of VAT franchising

Question	Verified Answer
What is it?	A regime that exempts those who invoice below a threshold from charging and declaring VAT
Is it in force in Spain?	NO for domestic operations. Pending project for cross-border operations
Is it mandatory to implement it?	NO, the directive allows it but does not make it mandatory
When will it come into force?	No date. The government has opted not to implement it
Can I use it to sell in Spain?	NO
Can I use it to sell to France/Germany?	Potentially YES, when the 041 and 350 models are approved
What is the limit?	85.000€ (domestic, not implemented) / 100.000€ (cross-border)

#Official sources consulted

Last updated: Jan. 14, 2026

Official sources:

Directive (EU) 2020/285 - OJEU
Draft Order models 041 and 350 - Ministry of Finance (November 2025, pending)
Agencia Tributaria - Novedades IVA régimen franquicia
ATA Press Releases
Royal Decree-Law of December 2025 (postponement Verifactu and extension of modules)

Secondary sources consulted:

Supercontable.com
Self-employed and Entrepreneur
InfoAutonomous
SMEs and Self-Employed

⚠️Important note

Tax information is subject to change. Always consult your tax advisor for your specific case. This article is for informational purposes only and does not constitute tax advice.