Essential Guide for Self-Employed Workers in Spain

Made the leap from employed to self-employed in the hopes of bagging some professional freedom? Then you’ve come to the right place for some much-needed tips for your business to thrive. While the entrepreneurial environment in Spain is dynamic, there is a high failure rate for start-up businesses, with a third folding in the first three years. The biggest mistake most people make when deciding to set up a business in Spain is forgetting to budget for the 12 months or so that it takes to get the business off the ground.

There is also the seemingly impenetrable bureaucracy, which is hard enough for a fluent Spanish speaker to comprehend, let alone a fledgling newbie. To get through this, you will need a gestor, a paperwork-professional who will guide you through all the rules and regulations you will have to comply with.

The gestor is vital for administrative procedures, so make sure you find a highly-recommended one and don’t forget to add around €2,000 to your budget to cover his or her costs. Once set up, you are advised to maintain a gestor at a cost of around €50 per month. For a full list of registered gestores in Spain, check out this website.

When you have decided on the type of business you want to set up, the next question is what type of business structure will best suit yours and your business’ needs.

This is an important question in Spain as it depends on whether you need start-up capital or to employ staff, and it’s best discussed with an accountant (asesor).

In Spain there are four main types of businesses:

• Autónomo
• Sociedad Civil
• Sociedad Limitada (SL)
• Sociedad Anónima (SA)
  

Autónomo

To be an autónomo, you need to make monthly contributions, by direct debit, to the Spanish Social Security office. These will vary according to your taxable income, but the minimum, as of 2020, was set at €286 and the maximum at €1234 per month. This cuota gives entitles you to free healthcare, at doctor’s offices and hospitals (but not dentists), and education. This is the minimum obligatory amount and, depending on how much you earn, you need to ensure that you have this put aside regardless of monthly earnings. That said, if you register as a first-time freelancer in Spain, you will be entitled to pay only €60/month for the first year.

Sociedad Civil

This a partnership where several individuals come together to form a business. For this, you will need to draw up an agreement that is legally binding between yourself and your partners. No minimum investment is required and any financial obligations or debts are divided up between the partners.

Sociedad Limitada (SL)

A limited liability company (more than 95% of new companies are SL) requires capital to the tune of €3,000 to be paid directly into a salary bank account. This will be returned once the company is set up.

Sociedad Anónima (SA):

Requires returnable capital backing of €6,000.

Registering Your Business

If you are going to be operating your business from its own premises, you will need to register it by getting an opening license (licencia de apertura) that defines what it is and how it will operate. This is issued by the town/city hall in the area where you are going to set up your business. If you are intending to open a restaurant, bar or other food and drink establishment, you will need to obtain a health license, which will require an inspection by local authorities.

Registering with the Tax Office (Agencia Tributaria)

All freelancers and businesses must register for VAT regardless of how much they earn. Once you have registered with the tax authorities, you will receive an ID number called a CIF (this is the same as the NIE but for businesses). The Agencia Tributaria is responsible for levying a tax on your business activities and VAT must be paid on a monthly or quarterly basis.

Registering with the Social Security Office

You need to register with Social Security so that your business can make the required social security payments.

This varies on the type of business you have set up. If you are autónomo (freelance) and contribute for 25 years (recently revised upwards from 15 years), you are entitled to a pension. If your business is an SL or SA, you will have to pay social security on behalf of your employees.

The Spanish tax year runs from 1 January to 31 December.

Funding a Business

Loans are available in Spain for locals and foreigners. The Instituto de Crédito Oficial is attached to the Ministry of Economy and Finance and boosts any economic activity that merits development or promotion.

For a more ‘peaceful’ life, there is always the option of buying an existing business. The main benefits this plan offers are that you can get up and running quickly and will already (hopefully) be making a profit and have a customer base. In order to do this, though, you will need to have substantial capital ready to invest. If you are interested in going down this route, you need to be aware that just because a business is operating does not mean it is legal.

If it is legal, it does not automatically mean that you will be able to obtain a license to operate it.

Also, do not always trust that the accounts you are issued with are the actual accounts for the business.

They might just be the accounts drawn up for the tax office. Finally, don’t forget to question why the business is being sold. Is there something wrong with it?

Due diligence is required every step of the way. Do not take anything at face value.

Working Hours in Spain

Depending on what type of work and where you are in Spain, a typical working day begins at 8am, stops for breakfast at nine, continues until 2pm, stops for a lunch break from 2pm until 5pm, and then continues until around 8pm.

In southern Spain, the lunch break can be even longer, with work resuming at 6pm until 9pm. A 40-hour week is typically expected, with 24 days of holiday leave a year.

Most of the country shuts down in August and when it comes to fiesta time and family occasions, you may as well shelve any plans of working, at least “hasta mañana”.

Self-employed Spain - Holiday Leave

This is where it gets tricky - unlike salaried workers, i.e. those employed by someone else, who are entitled to 24 days of holiday leave a year, freelancers often struggle in this respect. Although the Self-Employed Spain Work Statute provides for 18 days’ holiday a year for dependent self-employed workers (those working for a third party), entrepreneurs or professionally independent workers lack such freedom and, therefore, entitlement to paid leave. According to this article by El Mundo, in this scenario there are 4 possible options:

1. De-register as a self-employed worker.
   Lots of freelancers de-register during their holidays to avoid paying the monthly fee. The problem with going down this route though is that you may lose out on applicable discounts, i.e. the €60/month for new self-employed workers will increase to the regular amount once you register again after your holidays.
2.  
3. Plan ahead.
   You may decide to bear the loss of income during your holidays. To get around this in a way is to plan ahead - let your clients know well in advance and make sure you deliver projects and issue invoices etc., ahead of your break.
4.  
5. Take advantage of clients’ holidays.
   It might be a smart idea to coincide with your client’s holidays, perhaps in summer or over Christmas, when the workload is lower.
6.  
7. Disconnect, at least partially.
   You could take some time off but still spend a few hours a day answering emails, making phone calls, brushing up on your knowledge of the sector or making progress on a project.

Public or Private Health Care

Although your social security contributions entitle you to free public healthcare, lots of freelancers opt to take out a private health insurance policy for that extra safety cushion. Caser’s Self-employed Health Insurance offers policyholders income tax deductions, family discounts, 24-hour global cover, a fast and efficient service (no waiting lists), plus so much more. See more here.

Spain offers countless options for making the leap to the self-employed world, but it’s clear that not only is prior in-depth research needed but the help from a paperwork specialist (gestor) too. In short, save your pennies, do your homework, hire the help of a professional, and jump right in. Good luck with your new venture.