Choosing the wrong IAE category can have tax consequences for self-employed workers

Why is it important to choose the correct IAE category?

The Economic Activities Tax (IAE) classifies business and professional activities according to their nature.
Although it may seem like a mere administrative formality, choosing the wrong category can lead to tax and accounting consequences that directly affect freelancers and businesses.

What problems can an incorrect classification cause?

Advisors warn that choosing an inappropriate category can lead to errors in the application of VAT or personal income tax (IRPF), which may result in penalties or an unfavourable tax treatment.
A common mistake is charging VAT when it doesn’t apply, or failing to apply it when it should, especially in sectors such as education, training, or professional services.

An incorrect classification can also affect the remuneration and taxation of shareholder-employees, altering how income and withholdings are declared.

What do experts recommend?

Experts recommend periodically reviewing the tax classification of the activity, particularly when there have been changes in services or business structure.
This review helps to:

• Avoid errors in VAT or income tax declarations.
• Prevent fines arising from incorrect classification.
• Ensure taxation accurately reflects the real business activity.
• Improve competitiveness, avoiding unnecessary costs or loss of deductions.

What should freelancers do if they detect an error?

If an incorrect classification is identified, it can be corrected by notifying the Tax Agency through form 036 or 037.
Advisors recommend not delaying this correction, as postponing it can lead to retroactive adjustments and administrative complications.

In summary

Choosing the correct IAE category not only prevents sanctions but also ensures proper tax treatment consistent with the real nature of the business.
A periodic review of the fiscal classification —with the help of professional advisors— is the best way to avoid errors and optimize tax management for freelancers and small businesses.