The reverse charge mechanism (ISP) is an arrangement whereby the party required to pay VAT to the Tax Authority is not the supplier (subcontractor) but the recipient (main contractor or developer), provided that both are businesses or professionals. In construction, the reverse charge applies to the execution of building works when the recipient acts as a business. Failing to apply it correctly is one of the most common infringements and may result in penalties of between 50% and 150% of the unpaid amount.

Self-employed workers under the objective assessment scheme (modules) in the construction sector are subject to a special 1% personal income tax withholding (instead of the general 15%), provided that the works or services are performed for businesses or professionals. This withholding is applied by the payer when settling the invoice. Applying the wrong withholding can create issues with the Tax Authority for both parties.

The REA is a public register under the Labour Authority in which companies wishing to work as contractors or subcontractors in the construction sector must be registered, in accordance with Subcontracting Act 32/2006. Registration is mandatory in order to take part in subcontracting chains on construction projects. Without REA registration, your company cannot legally be subcontracted, which excludes it from many projects and tenders.

The General Collective Bargaining Agreement for the Construction Sector regulates minimum employment conditions: occupational categories, base salaries, travel and transport allowances, tool wear allowance, bonuses, holidays and termination procedures. There are provincial agreements that may improve on the national one. Non-compliance, particularly in matters of payroll and occupational categories, is regularly reviewed by the Labour Inspectorate and CEMAC.

In addition to general VAT and personal income tax, the construction sector is subject to specific taxes: ICIO (Tax on Constructions, Installations and Works), ITP and AJD (on the transfer of properties and mortgage loans), and particular features in corporate income tax (deductions for reinvestment in assets, accelerated depreciation of machinery). The reverse charge VAT mechanism and special withholdings on flat-rate scheme contractors are the areas most prone to error.

The simplified occupational pension plan (PPES) is a social welfare instrument promoted by the construction collective bargaining agreement that requires companies in the sector to make periodic contributions for their workers. It is usually managed through entities such as VidaCaixa. Non-compliance may give rise to claims by workers and to employment-related penalties.

The Tax on Constructions, Installations and Works (ICIO) is a municipal tax levied on any construction, installation or works requiring a town planning building licence. It is paid by the owner of the works (not the builder) at the time of applying for the municipal licence. The tax rate may reach up to 4% of the material execution budget. In some cases, reductions may apply.

In general, when annual net profit exceeds €40,000–€50,000, it starts to be more efficient to be taxed as a company (corporate income tax at 23–25%) than as a self-employed worker (personal income tax up to 47%). In addition, an SL limits personal liability, makes it easier to bring in new partners and allows for more flexible remuneration. If two or more people are working together, the company structure also makes it possible to regulate the distribution of profits through a shareholders’ agreement.

A comprehensive advisory service for the construction sector covers: tax management (VAT with reverse charge, personal income tax, corporate income tax, ICIO, ITP/AJD), employment matters (contracts, payroll, construction collective bargaining agreement, pension plan, REA), commercial matters (contracts with subcontractors, UTEs, claims, insolvency proceedings) and accounting. At Blegal we also add representation before the Labour Inspectorate, the AEAT and the Employment Tribunal.

The cost varies according to turnover, the number of employees and the services contracted. For a self-employed construction and refurbishment worker, the monthly cost may range from €80 to €200. For a company with employees and subcontractors, the price is tailored to the actual volume of work. Ask us for a personalised quote with no obligation.

Yes. We work with self-employed workers under all schemes: simplified direct assessment, normal direct assessment and modules. We manage your quarterly returns, your annual personal income tax, withholdings on your business clients and we advise you on when the time is right to make the leap to becoming a company.

The reverse charge in construction is one of the most error-prone areas and one of the most frequently reviewed by the AEAT. We review your issued and received invoices to verify that it is being applied correctly, we identify past errors and we process self-assessment rectifications when necessary. We also train your administrative team to prevent future errors.

Yes. The Subcontracting Act imposes joint and several liability on the contractor for the employment and Social Security debts of its subcontractors. We review subcontracting contracts, verify that subcontracted companies are up to date with payments and registered with the REA, and we advise you on the subcontracting chain to minimise risks.

Yes. We take care of the entire process: gathering the documentation, submitting the application to the competent labour authority and following up until resolution. We also handle the periodic renewals so that your company does not lose its accreditation.

Yes. We have experience in the taxation and legal structure of real estate developers, Temporary Joint Ventures (UTEs) and corporate groups in the sector. We advise on the formation, taxation and dissolution of UTEs, as well as on the consolidated accounts of corporate groups.

Yes. We have advised on the acquisition of property portfolios from SAREB, including the renegotiation of mortgage loans and the legal and tax structuring of the acquisition. We also work on insolvency proceedings involving real estate assets and unfinished works.

Yes. Our team of employment law solicitors will represent you before the Labour Inspectorate, the Sub-Inspectors, CEMAC and the Employment Tribunal in dismissal proceedings, claims for sums owed, collective disputes and administrative penalties.

To take over your file we need: the company’s or self-employed worker’s tax identification number (NIF), registration with the Tax Authority and Social Security, the latest tax returns, current contracts and payslips, deeds of incorporation if it is a company, and certificates of standing with the AEAT and the Social Security General Treasury (TGSS). We will guide you through the entire process of changing advisory firm.

Yes. The initial consultation is completely free and with no obligation. We analyse the tax, employment and commercial situation of your company, identify risks and savings opportunities, and present you with a personalised quote.

Yes. We work 100% digitally with construction companies throughout Spain. We also handle the specific features of provincial construction agreements and obligations vis-à-vis the labour authorities of each autonomous community.