CNAE, IAE, and Other Mythical Creatures
Your activity (or activities) has a CNAE and an IAE category. Let us explain what those are, what they mean, and what you should know about choosing both.
So you're self-employed. And, what do you actually do? To potential clients, you'll explain the benefits of working with you. But if Hacienda (or an advisor) asks, the question usually sounds more like: "Can you tell us your CNAE and IAE?"
CNAE and IAE
As a freelancer, there are two agencies you're about to get very familiar with: Social Security and the Tax Agency (AEAT), a.k.a. Hacienda.
When you register as self-employed, you'll need to do it with both, and tell each one "what you do." The catch: each agency uses a different classification list, with its own numbering. And the lists don't neatly map onto each other. One agency might group two, three, or even five or more activities under a single code, while the other codes them separately.
CNAE: Social Security
CNAE (National Classification of Economic Activities) is the code Social Security uses to classify what you do, based on risk. Is your chosen activity sitting behind a computer eight hours a day? Probably safer than hunting crocodiles in the sewers. In practical terms, that means you'll be assigned a lower contribution rate for workplace accidents and occupational illness.
On top of that, certain sectors tied to specific CNAE codes give you access to grants and subsidies, which is exactly why picking the right one matters.
IAE: Tax Agency
IAE (Tax on Economic Activities) is the code used by the AEAT. As explained in our post on IRPF, IAE codes fall into three broad groups. Those groups determine how you invoice, which tax models you file quarterly, and so on. This is the one with the most visible impact on your day-to-day.
Is there a correlation between the two lists?
Yes and no. There are some parallels, but no direct correlation between CNAE and IAE. You'll find websites offering "conversion" between the two codes, but these are just suggestions, and they are not binding for anyone.
That’s exactly why we always recommend you ask questions, and don't trust anyone who only asks for one of the two numbers, or who expects you to define your work in a single sentence. The reality is that every job and every person is its own world, and the possibilities are broader than they look. In fact, if you keep reading our posts, you'll notice we constantly recommend reviewing what you actually do and discussing it with your advisor, making sure no pivots and changes fall through the cracks. Maybe you need to register under a different category (epígrafe), or switch it altogether, maybe you don’t. Either way, it should be a conscious decision, at least once a year.
You can even end up with a single CNAE but several IAE registrations. Remember, the AEAT uses these category to sort activities into tax groups, so it's entirely possible to have codes with very similar — or nearly identical — descriptions sitting in two different groups.
Can I just pick whichever epígrafe suits me best?
If choosing a “professional” category mean invoicing with withholding tax and other complications, why not just pick a “business” category and make life easier? (We've genuinely seen other advisors recommend exactly that, to make their own quarterly filing simpler.)
Unfortunately, it's not that simple. Ultimately, the AEAT decides which group you "really" belong to, based on what you tell them. If they disagree, it can quickly turn into an audit. And if the AEAT decides you should actually be in a professional category, and thus you should be invoicing with withholding tax, then they'll go after your clients to reclaim that withholding. It's a situation far better prevented than fixed, by choosing the right category from the start.
Along the same lines: if you hire other professionals for services, ask them for their AEAT registration certificate so you can check what category they are registered for, and whether it's the right one.
So which one do I actually pick, if I'm not sure?
Remember: there are two groups to choose between, unless your activity is genuinely artistic: the business group and the professional group.
The question to ask yourself: can I carry out this economic activity using only my own resources? If yes, pick a category from the professional group. Do you need other people's help to carry out the activity? Then pick a category from the business group.
Do I actually have to pay the IAE?
The IAE is a tax, and limited companies (SLs) do pay it for each economic activity, as soon as their revenue passes €1 million a year. As a freelancer, you're exempt from this tax, regardless of your revenue.
If you reach that million, you've most likely already set up an SL. In that case, yes, you'll pay for each IAE category you're registered under, which makes it worth optimizing your choices. We'll cross that bridge when you get there.
In summary (print this and stick it on the fridge)
- CNAE is the code Social Security uses for your economic activities. IAE is the code the AEAT uses for your economic activities.
- There's no fixed conversion between CNAE and IAE.
- Choose your IAE and your group (professional or business) carefully.
- The IAE only costs money if you're a company billing more than €1 million a year.
- It's worth periodically checking whether your CNAE/IAE still match your current (and future) reality.
Got questions? Get in touch and we'll help you choose wisely.
