Accounting for Freelancers

Entrepreneurship is full of opportunities, but the life of a freelancer is filled with a labyrinth of bureaucracy and tax obligations. Being a freelancer means you have very limited time, and within that time, you have to be the accountant, the tax consultant, and the manager of your finances—unless you choose the right partner.

This article is the most complete and up-to-date guide on accounting for freelancers. Whether you are a new professional currently starting your sole proprietorship or an experienced one looking for answers, you will find everything you need here.

First Steps: Starting Your Profession & Record Keeping

Before you issue your first invoice, you must have the foundations in place.

Starting a Sole Proprietorship

Starting a sole proprietorship involves declaring the commencement of activities to the Tax Office (D.O.Y.) and the General Commercial Registry (G.E.MH.), where required. As a freelancer, you usually maintain Single-Entry Books (INCOME-EXPENSES). This means you only record your income and expenses without further complex procedures.

KAD: The Activity Code

The Activity Code Number (KAD) determines the type of services/products you provide. It is important because it affects your VAT status, your eligibility for programs and subsidies (!!pay great attention to subsidies, as they usually require you to have the correct KAD before the program begins), and potential tax exemptions. Do not choose hastily. Your accountant should guide you to the correct KAD so that you don't face future problems that could lead to incorrect taxation or even restrict you from subsidized programs.

At our accounting firm, with long-standing experience in starting every type of business, we can guide and advise you through your first steps as a new entrepreneur, as well as handle the entire process for you.

Online Accounting Books: myDATA

myDATA is the AADE (Independent Authority for Public Revenue) platform where all your income and expenses are now recorded in real time.

What do you need to send to myDATA?

As a freelancer, you have the obligation to transmit:

• Your Income/Invoices: Immediately upon issuance (either through billing software or via the AADE application).

• Your Expenses: The expenses you incur must be "classified" on the platform. This classification is critical for correct tax representation and the determination of the final tax payable.

What is the "Classification" of Expenses?

Classification is the process of informing AADE whether an expense document (e.g., an invoice from a supplier) is an operating expense, a purchase of goods, a fixed asset, or a service received. You also inform AADE whether the document in question is subject to VAT or not.

Do I have to send all the expenses myself? No, expense invoices are sent by their issuer (your supplier). You, through your accountant, only need to classify these expenses and send the retail receipts that are not sent by the issuer (e.g., fuel receipts).

Income Taxation: How Your Tax is Calculated

Your tax is calculated based on your net profit, which is derived from your Income minus Deductible Expenses.

Tax Return E3

Form E3 is the foundation of your taxation. This is where your income, expenses, depreciation, and net profits are recorded in detail.

IMPORTANT EXCEPTION - IMPUTED TAXATION (Recent Legislative Changes): You must take into account recent changes (e.g., Law 5073/2023) which established an imputed minimum income for freelancers (with some exceptions). This means your tax will be calculated based on:

• Either your actual net profit.

• Or the imputed minimum profit (which depends on the minimum wage, years of activity, payroll costs, and your turnover).

You will be taxed on the higher of the two amounts. For an accurate calculation, specialized accounting advice is required.

Tax Scale for Freelancers

Your net profit is taxed according to the following scale (Significant reductions apply for youth up to 30 years old, parents, and families—find the detailed tax scales for 2026 here):

Income (Euros)	Tax Rate
Up to 10,000	9%
10,001 – 20,000	20%
20,001 – 30,000	26%
30,001 – 40,000	34%
40,001 – 60,000	39%
Over 60,000	44%

Deductible Expenses

Proper expense management is the most effective way to reduce your tax liability.

Which Expenses are Deductible?

In general, expenses are deductible if they fulfill three conditions cumulatively (according to the Income Tax Code):

• They serve the purposes of the business or are related to your normal commercial activity.

• They are documented with legal vouchers (Invoices) that have been transmitted to myDATA.

• They are not explicitly prohibited by law (e.g., fines, expenses for illegal acts).

At our accounting firm, with extensive experience in starting every type of business, we can guide and advise you through your first steps as a new entrepreneur, as well as handle the process entirely on your behalf.

Examples of Deductible Expenses:

• Rent of your professional space (or part of the rent/housing expenses if it is your registered headquarters).

• Telephony/Internet/Electricity/Water (depending on the percentage of professional use).

• Commissions and third-party services (e.g., accountant, lawyer, graphic designer, programmer).

• Expenses for business travel and meals.

• Purchases of goods or consumables used for providing your service/sales.

• Marketing and advertising expenses (Google Ads, Meta Ads, etc.).

• Depreciation of your equipment (computer, furniture, software)—calculated in a specific manner and timeframe.

• EFKA insurance contributions (fully deductible).

Attention! Expenses must be "in the interest" of your business. A trip abroad is deductible if a professional purpose can be documented (e.g., conference, client meeting), but not if it is simply a vacation.

Attention!! While the aforementioned expenses may be allowed to reduce your turnover, not all of them participate in VAT, such as travel and meal expenses, rent, EFKA, depreciation, etc.

Value Added Tax (VAT)

When are you obligated to register for VAT?

• Mandatory Registration: If your turnover exceeds €10,000 (the exemption threshold) in a single year.

• Voluntary Registration: You can choose to register earlier if you deal with businesses that require VAT or if you have many VAT-inclusive expenses (so that you can deduct them).

• Exceptions: Certain professional activities (e.g., doctors, educators) are exempt from VAT.

  
  

How does VAT work?

VAT is a tax; it is neither income nor an expense for your business.

• Input VAT: The VAT you pay to your suppliers.

• Output VAT: The VAT you collect from your clients.

Every month/quarter, you submit the VAT return and pay the difference to the Tax Office (D.O.Y.).

• If the result is negative (e.g., you had many VAT-inclusive expenses), you have a credit balance, which is either carried forward to the next period or can be requested as a refund.

• If, on the contrary, your VAT-inclusive income exceeds your VAT-inclusive expenses, this means you have a debit balance, which you must pay.

Insurance Obligations: EFKA

As a freelancer, your insurance is managed through EFKA (Single Social Security Fund) and contributions are mandatory.

You choose one of the prescribed insurance categories. The amount of the monthly contribution is fixed, and you have the right to change your category once a year. The insurance contributions you pay to EFKA are fully deductible from your taxable income, thereby reducing your tax.

Taxpayer with a "Service Provision Invoice"

If you provide services (specific services considered as liberal professions, such as engineer, lawyer, agronomist, etc.) based at home to up to 3 clients, or if there are more, 75% of your income must come from one of them and you have written contracts with them, you can be considered an "employee" for tax purposes. In this case, you will benefit from the employee's tax-free threshold and the tax scale will be the same as mentioned above. In the event that you choose to be taxed in this way, the only expense allowed to be deducted to reduce your profits is the insurance contributions, i.e., EFKA.

Tax Withholding (or Withholding Tax)

This is a complex issue that often confuses professionals. If you belong to the category of liberal professions, you are required to apply a 20% tax withholding on invoices exceeding €300 (net value).

Practically, this means you will receive a smaller payment (reduced by the withholding amount, which is calculated on the invoice's net value), and your client is obligated to pay that withholding amount to the tax authorities. This withheld tax is considered a prepayment against your total tax liability at the end of the year.

Therefore, you "get it back" through your tax return. If you end up owing tax, the withheld amount will be offset against it; however, if no tax is due, the withholding will be considered a refund and will be deposited into your bank account, provided you have no other outstanding debts to the tax office.

The application of this provision is particularly sensitive and should be done with your accountant's advice. At our accounting firm, we can assist you with every detail.

Frequently Asked Questions (FAQs) for Freelancers

• How much tax will I pay in total?

  Your total tax consists of income tax and the tax advance. Since the tax is progressive, your final effective rate is always lower than the maximum rate seen in the brackets (e.g., if you earn €25,000, you will pay 9% on the first €10,000, 20% on the next €10,000, and 26% on the final €5,000).

  Do I need to keep physical records?

  Although myDATA digitizes everything, the law requires you to maintain your records (Invoices/Receipts) in either physical or digital form (e.g., scans, PDFs) for at least 5 years after the end of the tax year. This is essential in the event of a tax audit.

  Can I do my own accounting?

  Theoretically, at the beginning, yes. Practically, no—not if you want peace of mind and to avoid fines. Furthermore, for a turnover of €30,000 and above, it is mandatory to have your E3 form signed by a certified accountant. The complexity of myDATA, VAT, EFKA, and the continuous changes in tax legislation (especially with presumptive taxation) makes an accountant/tax consultant an indispensable partner. Their fee is a deductible business expense that pays for itself many times over by avoiding errors and saving on taxes.

  Proper accounting management for freelancers is not just an obligation; it is a strategic tool. Don't let bureaucracy hinder your growth. Invest in the right accounting support and focus on what you do best: your business.

  At our accounting firm, we understand the complexity of managing a freelancer's tax obligations and are here to offer you comprehensive support—from the initial business setup to growth consultancy. We conduct individual meetings via phone, Zoom calls, or email to answer all your questions and provide tailored solutions for your needs.