- Installment payments act as quarterly tax advances for the self-employed and companies.
- The calculation varies depending on the tax regime, whether it is direct estimation, objective estimation or Corporate Income Tax.
- These amounts are fully deducted in the annual settlement of the corresponding tax.
If you've embarked on the adventure of starting your own business or own a company, you've surely heard about the option of paying taxes in installments . Essentially, it's a way for the tax authorities to collect your tax gradually throughout the year, instead of paying it all at once at the end. It's like building up a mandatory savings account so that when your annual tax return arrives, the impact on your finances isn't so severe.
The curious thing is that many people drive themselves crazy wondering whether or not they need to file them. The reality is that not all self-employed individuals are required to do this, although they all have to file income tax returns. To avoid being caught off guard and ending up with a surcharge that wipes the smile off your face, let's take a closer look at how this system works for both individuals and legal entities, starting by understanding the most common types of taxes in Spain .
Who must make quarterly income tax payments?
As a general rule, anyone engaged in economic activity must make these advance payments, regardless of whether they use direct or objective estimation. However, there is a very important exception for professionals (such as lawyers, designers, or consultants). If in the previous year more than 70% of your income was already subject to withholding tax on invoices, you are exempt from filing the quarterly payments.
In the case of agricultural, livestock, and forestry activities, the same 70% rule applies, although compensation and capital grants are excluded. If you have just started your business, the income for the current period to which the payment refers is used to calculate this percentage. On the other hand, if you are part of an entity under the income attribution regime, each partner must make their payments in proportion to their share of the profit within the entity.
Deadlines and models for the self-employed
To avoid missing deadlines, note that payments are made quarterly. The periods are from April 1st to 20th, July 1st to 20th , and October 1st to 20th, with the final filing due between January 1st and 30th of the following year. It's crucial to understand that even if you have no tax liability due to losses, you must file a negative tax return to avoid issues with the tax authorities. Always check the taxpayer calendar in April and other key months.
- Model 130: This is the one used by taxpayers in direct estimation (either normal or simplified).
- Model 131This is the specific form for those who pay taxes under objective estimation, commonly known as modules.
How to calculate the amount to be paid
If you are using the direct estimation method, the calculation is based on the net income earned from the beginning of the year to the end of the quarter. A 20% tax rate is applied to this amount , from which you can deduct any withholdings already made by your clients and any estimated tax payments you have already made in the same year.
For those using the simplified tax regime, the situation is different. The amount depends on whether you have employees: 4% is applied if you have staff , 3% if you have only one employee, or 2% if you have no employees. In the case of primary sectors (fishing, agriculture, etc.), the payment is always 2% of the quarter's revenue , excluding capital grants.
There are some benefits available for those with low incomes. If your net profits for the previous year were less than €12.000, you can apply an additional reduction ranging from €25 to €100, depending on the exact amount of your income. There are also specific reductions for those who reside on the island of La Palma or carry out their business activity in Ceuta and Melilla.
Deductible expenses to reduce the payment
To ensure you pay the fairest possible amount, it's vital to deduct all eligible business expenses . For the tax authorities to accept these deductions, the expense must be supported by an invoice and recorded in your accounting records. For example, your self-employment social security contributions are fully deductible, as is your office rent.
If you work from home, you can deduct a percentage of your electricity, water, or gas bills , based on the square footage used for your work. Meal expenses (within daily limits), private health insurance (up to €500 per family member), and online software tools needed for work are also deductible.
Installment payments in Corporate Income Tax (CIT)
When we move to the realm of businesses, the regulations change and are governed by the Corporate Income Tax Law (LIS). Here, the purpose is to anticipate the corporate income tax that will be settled at the end of the fiscal year. Almost all entities must file these returns, except those that are fully exempt or those taxed at 0% or 1%. The deadlines are the first 20 days of April, October, and December.
There are two systems for calculating the tax due. The first is the fixed-rate system , where 18% is applied to the total tax due for the previous period. The second is the accrued tax base system , which is mandatory for companies with a turnover exceeding €6 million. In this second case, a percentage (generally 17%) is applied to the tax base for the first few months of the year.
For large companies with turnovers exceeding 10 million euros, there is a minimum installment payment that cannot be less than 23% of the positive accounting result, ensuring that the Administration receives a constant flow of income.
Impact on the annual tax return and refunds
Many people fear paying twice, but that's not the case. Quarterly payments are advance payments on account . When it's time to file your annual tax return (form 100 for the self-employed), all the amounts paid quarterly are entered in the corresponding box to reduce the final tax liability.
If at the end of the year you turn out to have paid more than you owed, whether through withholdings or installment payments, the Tax Agency must automatically refund the excess . This is a way to balance the tax system and ensure that you only pay what your actual income reflects.
Mastering forms 130 and 131 and the deadlines for Corporate Income Tax allows any professional or company to maintain their financial health without surprises. Ultimately, it's about managing quarterly advance payments that are then deducted from the final tax return, making cash flow more manageable and ensuring smooth and error-free compliance with tax obligations .