Steps to Follow

First, you have to go to your corresponding Tax Office and register with it by signing the “censo” or census. In order to do this, you will have to fill in Form 036 under the heading Traductores e Intérpretes (Translators and Interpreters) and the Group Number 774, Section Two. Today it is not necessary to register for the IAE (Business Tax). The census register must be signed on the day when the trading activity begins or during the previous ten days.

Second, you have to register under the Special Regime for Freelance Workers at the Social Security Office within a month following the beginning of the activity (this costs around 240 euros a month) or pay contributions according to the income obtained, in which case this amount would be changeable. You must go to your corresponding Social Security Office and hand in a photocopy of the tax census form, your ID card (D.N.I.) and then fill in Form 521/A.

When you have registered with the Tax Office and with the Social Security Office, you can start to practice as a freelance translator. Quarterly V.A.T and income tax (I.R.P.F.) declarations and one annual V.A.T. declaration (January) and one annual income tax (I.R.P.F) declaration must be made. Furthermore an invoice must be issued for every job and your accounting book must be updated.

Nevertheless, when you first become a freelance translator you can do collaboration receipts as invoices. These are like invoices, but the V.A.T. is not added, only income tax (I.R.P.F) is deducted. These collaboration receipts are declared in your V.A.T. declaration under the heading of work performance, but you can not exceed 3,000 euros per year.

At the beginning of your activities, another option is to present simplified quarterly tax declarations (without deductions) and employ an accountant to prepare the yearly income tax declaration (I.R.P.F.) in June. The yearly V.A.T. declaration is quite simple and the tax office will be able to provide help. Getting started is not easy, given that you have to pay certain expenses with little income.

Over the first few years of your working life you can make a monthly discount of 25% and the income tax rate (IRPF) is only 7%, instead of 15%. But the annual declaration must be calculated with the real I.R.P.F. percentage that corresponds to you depending on the total taxable base invoiced. That is to say, it is not really a discount, it is simply a means of increasing your liquidity during the fiscal year. For the first two years, a 25% per cent discount is made on your monthly Social Security payments.

Obligations of a Freelance Translator

A translator is required to fulfil the following obligations:

• Obtain legal receipts and deduct costs only for products or services relating to the profession.
• Issue proper legal invoices (including 18% withholding tax and 16% V.A.T). These must be kept for five years.
• Make quarterly income tax (I.R.P.F.) and V.A.T. declarations, and an annual V.A.T declaration in January  and income tax deduction (I.R.P.F) in May/June.
• Keep cost and income records. These records may be demanded in the case of a tax inspection.
• Pay State Social Security contributions every month and within the corresponding month. The payments can be by direct debit or you can obtain the 12 slips from your local Social Security office and go to the bank for pay it every month. However, now they will only give you one slip each month, instead of 12 slips in advance for the whole year. This means you must go to your local office twelve times a year, a deliberate measure to encourage free-lancers to pay their contributions by standing order at the bank. The slip for January must be paid in January, etc. Late payments will incur penalties.

Should Translators Always Charge V.A.T.?

Some controversy exists on this point, which seems to centre around Article 20 of Section One, Number 26 of the Law on Value Added Taxation (Ley del Impuesto sobre el Valor Añadido) which refers to professional services rendered by translators. It states that translations of scientific, literary or artistic works are exempt from V.A.T. under another piece of legislation, the Law on Intellectual Property (Ley de Propiedad Intelectual), thus recognizing not only authors of original works but also those who produce works of scientific, literary or artistic nature which involve a distinct personal and original contribution to the pre-existing work. In short, this may explain why translators working for publishing companies would not charge V.A.T.

However, the ambiguity of these laws is obvious. What constitutes "a distinct personal and original contribution" and what constitutes a scientific, literary or artistic work? Some translators take advantage of this ambiguity in order to avoid V.A.T.

However, the vast majority of translations required in the business world are indeed subject to V.A.T., as indicated by the tax authorities: letters, informative leaflets and literature, advertisements, conferences, speeches, reports, etc.

There is little reason for the translator not to charge it, because the amount is paid by the client anyway and the translator simply pays it to the tax authorities on the client’s behalf. The only inconvenience is having to make the quarterly and yearly V.A.T. declarations. Furthermore, agencies do not mind being charged V.A.T. either, because in paying it they are able to reduce their tax liability.

Presenting a Legal Invoice

The invoice that the translator gives to the client must contain the following data:

• Personal details of the translator (name and surname, the address registered with the taxes authorities and NIF (tax 10 number or CIF number).
• The invoice number and the date on which the invoice is handed over.
• The client’s name, address and N.I.F or C.I.F. number.
• Concept (work completed)
• Taxable Base
• V.A.T. or I.V.A. (+16%, if it is necessary depending on the type of translation). The translator charges the client this amount, collects it and then pays it to the tax authorities every three months in his quarterly V.A.T. declarations. Apart from this, one annual V.A.T. declaration (January) must be made.
• Income Tax or I.R.P.F. (-15%). The client withholds this amount and pays it to the tax authorities on your behalf. Every year, the client must send you a Certificate of Tax Withheld (“Certificado de Retenciones”) stating how much tax they have paid in for you each year. In the same way as with V.A.T., the freelance translator must make four quarterly I.R.P.F declarations in April, July, October and January and one annual declaration in June.
• Total amount to be charged.
• Method of payment

 Example of invoice