What taxes your business pays and how to organise them with AI
By AiKit13 min read
If every quarter arrives and you don't know how much you'll have to pay, start by working out whether you're self-employed (autónomo) or a company, because that decides which taxes your business pays. The self-employed pay personal income tax (IRPF) and companies pay corporate tax (Impuesto sobre Sociedades); both pay over the VAT they charge. AI helps you understand it and get to your accountant with everything in order, without replacing them.
What taxes does your business pay?
#A business usually pays two taxes: VAT on what it sells and a tax on its profit. That second tax is personal income tax if you're self-employed and corporate tax if you have a limited company (SL). On top of that come the withholdings you make if you pay salaries or rent premises. Knowing which ones apply to you lets you plan how much money to set aside for each deadline.
The tax is what you pay, such as VAT, and the form (modelo) is how you declare it: Form 303 (modelo 303) for VAT, or Form 130 to pay personal income tax in advance.
It also helps to tell paying in advance apart from settling. During the year you pay part of the tax on your profit in advance, through instalment payments and withholdings. Once a year you settle it: the tax for the whole year is calculated and those advance payments are deducted.
The table puts them side by side.
| What is paid | Self-employed | Limited company (SL) |
|---|---|---|
| VAT on your sales | Form 303 every quarter and an annual summary on Form 390 | The same: 303 every quarter and 390 once a year |
| Tax on profit | Personal income tax (IRPF), in the annual income tax return | Corporate tax, Form 200, once a year |
| Advance payment of that tax | Form 130 every quarter (131 if you're under the module system), with some exceptions | Form 202 during the year, only if there is something to pay |
| Withholdings on salaries and professionals | Form 111 every quarter and 190 once a year, if you pay them | The same: 111 and 190 |
| Withholding on premises rent | Form 115 every quarter and 180 once a year, if you rent | The same: 115 and 180 |
| Transactions with third parties | Form 347 once a year if you go over a certain amount with one client or supplier; 349 if you trade with EU businesses | The same: 347 and 349 |
For your own case, ask the AI for this same table with your details. This is how the designer would ask:
Whatever depends on that missing information is your first question for your accountant.
What taxes does a self-employed person pay?
#A self-employed person pays personal income tax on what they earn and pays over the VAT on their invoices. Knowing how each one is paid in advance stops the quarter catching you without money set aside:
- Personal income tax (IRPF). For the self-employed, it taxes the net income from their business activity, that is, income minus deductible expenses.
- VAT. A self-employed person's VAT isn't the business's money: you collect output VAT on behalf of the Spanish Tax Agency (Agencia Tributaria) and deduct input VAT, the VAT you pay on your expenses. The difference goes on Form 303 every quarter, which you file even if you haven't invoiced anything.
- Withholdings you make. Those on your employees and on the professionals who invoice you go on Form 111; the one on renting premises goes on Form 115.
And this is how personal income tax is paid in advance during the year:
- How net income is calculated. Under objective assessment, or modules (módulos), it uses fixed indicators of the business, such as staff or premises, and is paid in advance with Form 131. If you're not under modules, you're under direct assessment (estimación directa). Simplified direct assessment is its simpler version, for those who didn't exceed a turnover limit the previous year, as explained by the Tax Agency.
- Advance payment through withholdings. If you're a professional and invoice companies or other self-employed people, the withholding on your invoices pays your personal income tax in advance. You'll find when each invoice carries it in the guide to making an invoice.
- Advance payment with Form 130. Every quarter you pay 20% of your net income accumulated since January, minus what you paid in previous quarters and the withholdings. If it comes to zero, you still file it.
- The 70% exception. If at least 70% of the income from your professional activity had tax withheld the previous year, you don't file Form 130, according to article 109 of the IRPF Regulations. It doesn't apply to a shop; farming, livestock and forestry activities have a similar rule.
To prepare Form 303, attach your invoices for the quarter to the AI and ask it this:
Check the totals with a few invoices in front of you, because it can misread an amount on a blurry photo. You take that table to your accountant, who calculates and files Form 303.
What taxes does a limited company pay?
#An SL's taxes are corporate tax, VAT and the withholdings it makes. The company is taxed on its profit and you on what it pays you, so don't pay personal expenses from the company account, or the other way round:
- Corporate tax. It taxes the year's profit, which comes from the accounts with some tax adjustments. The standard rate is 25%, according to the Corporate Tax Act (Ley del Impuesto sobre Sociedades); SMEs have lower rates that fall each year, and your accountant will tell you yours.
- Form 200. This is the settlement of that tax, once a year, after the accounts are closed. Knowing this helps you plan how much to set aside.
- Form 202. These are the instalment payments, the advance payments. In their general form they're calculated on the tax due in the last corporate tax return filed, so a new SL, or one that had nothing to pay the previous year, normally doesn't file it. Companies whose turnover is above the legal threshold calculate it on the current year's profit.
- VAT. It works the same as for the self-employed: Form 303 every quarter and an annual summary on Form 390.
- Withholdings. The same as for the self-employed, on Forms 111 and 115. If you're a director and draw a salary from the company, that salary has tax withheld and goes on the company's Form 111.
When is the quarterly return filed?
#The quarterly return for the self-employed and companies is filed from 1 to 20 April, July and October, and the one for the last quarter in January. Knowing that rhythm lets you set the money aside in time.
| Quarter | Months covered | When it is filed |
|---|---|---|
| First | January, February and March | 1 to 20 April |
| Second | April, May and June | 1 to 20 July |
| Third | July, August and September | 1 to 20 October |
| Fourth | October, November and December | In January |
Those dates cover VAT (Form 303), the self-employed instalment payment (130 or 131) and withholdings (111 and 115). If the last day is a non-working day, the deadline moves to the next working day.
The Tax Agency publishes the exact dates for each year in its taxpayer's calendar.
Within those deadlines, the designer files Form 303 and, if it applies to her, Form 130. The renovation company files Form 303, Form 111 for salaries and Form 115 for the premises.
If you file late without the Tax Agency having asked you to, you pay a surcharge that grows with the delay. If you first receive a formal request (requerimiento), the letter in which the Tax Agency demands the return, there may be a penalty, even for a Form 303 with no activity.
At the end of each month, give the AI that month's invoices and add them to the table you prepared for Form 303. That way, on the first day of the filing period your accountant already has everything, and you know how much VAT you've collected.
Which expenses are deductible?
#An expense is deductible when it meets three requirements, and every expense that meets them reduces what you pay. It lowers the income on which you pay personal income tax or corporate tax, and its VAT is deducted on Form 303. For the self-employed under direct assessment, deductible expenses have to meet the requirements set by the Tax Agency:
For an SL the requirements are similar, and the expense goes into the accounts.
AI helps you spot these slips while you can still ask for the missing invoice. Attach the month's expenses and ask it this:
With that table you can request the missing invoices in time and take your accountant a short list of questions.
Can you leave your taxes to AI?
#You can leave AI the job of understanding and organising your taxes, but not deciding how much you pay or filing them. Artificial intelligence answers with what you give it, and your full tax situation is almost never in what you paste in. If you want to know how it works inside, we explain it in the guide to AI for SMEs.
How does AiKit help you get to your accountant with everything in order?
#To reach each quarter with everything in order, you need your invoices and expenses to hand, and to be able to ask about them in plain language.
You make the requests in this guide in AiKit Chat: it explains a letter from the Tax Agency, sorts the quarter's invoices and expenses and prepares your questions for your accountant. With AiKit Desk you issue invoices that comply with Verifactu and TicketBAI, so the VAT on what you invoice is in order. AiKit doesn't keep your accounts or file your taxes: that's still your accounting firm's job.
