Spain boasts one of the largest communities of freelancers in Europe. According to Eurostat and the Forum of Independent Professionals, the country has experienced a 40% growth rate in the number of self-employed individuals since 2009.
Unlike other West European nations, most of such individuals are freelancers. If you want to run an independent business, you're in a good company because almost 69% of freelancers in Spain operate from a home office.
In Spain, a self-employed person is known as an autónomo. Freelancers, sole traders, unincorporated businesses, and small companies can be a part of this exclusive group. To comply with legal obligations for autónomos in Spain, local authorities require all self-employed individuals to register their business, pay tax, and charge VAT to their customers.
Reasons to Become an Autónomo in Spain
Becoming an autónomo in Spain has certain advantages. For instance, it enables you to run your business at a lower cost with a lot less administration than a typical registered company. Similarly, you can employ people, offset the business cost, and do almost everything that a large business entity is entitled to.
Perhaps, the most significant reason for registering as a self-employed entity is to receive tax benefits. This is particularly significant if you expect to earn more than €60,000 per year. In this case, an autónomo only pays 25% tax instead of the typical 47% associated with the individual tax bracket. The exact tax figure will depend on the state and the region where your business operates from.
From the perspective of an individual, here are some of the other benefits of becoming an autónomo in Spain:
- You can contribute a portion of your earnings to your social security fund.
- You and your family are eligible for health insurance, accidental cover, and unemployment benefits.
- You can participate in free government-assisted training programs.
How to Become an Autónomo in Spain
Anyone can choose to become an autónomo in Spain by registering with local authorities. However, the process may differ slightly based on your country of citizenship. For instance, citizens of the European Union and EFTA member states can live and work freely in Spain. The onboarding process is almost identical to that of a local businessman.
For others, living outside the EU jurisdiction, becoming an autónomo requires additional steps. If you're a citizen of a non-member EU state, you will need to apply for a self-employed work permit after receiving your residence permit in Spain. The work permit is a prerequisite for registration as an autónomo.
Legal Structures for Autónomos in Spain
An autónomo is the simplest business entity in the legal framework. Due to the numerous benefits of autónomo, the legal structure is suited to freelancers, sole traders, and self-employed individuals.
There are mainly two types of autónomo in Spain: Autónomo Professional and Trabajador Autónomo. Autónomo professional is a self-employed professional who mainly works as a freelancer or as an independent contractor without hiring a team. In contrast, Trabajador Autónomo is a self-employed worker who may hire others for help. These include taxi drivers, singers, and tour operators.
There is no minimum capital requirement to start your business. However, it's important to note that an autónomo is solely responsible for all the business activities and liabilities.
In Spain, autónomos are charged a progressive income tax rate. Depending on your income, the rate can vary between 19% and 47%. Accordingly, you will be required to file tax every three months, and at the end of the calendar year.
Here is a breakdown of tax brackets:
- Up to €12,450: 19%
- €12,450–€20,200: 24%
- €20,200–€35,200: 30%
- €35,200–€60,000: 37%
- €60,000–€300,000: 45%
- More than €300,000: 47%
How to Register as an Autónomo in Spain
If you're interested in becoming an autónomo in Spain, follow these four steps:
- Obtain NIE
- Register with the Tax Authorities
- Open a Bank Account
- Register for Social Security
- Obtain NIE: NIE, Número de Identificación de Extranjero, is an identification number used to identify businesses owned by foreigners. The identification number is convenient for a wide range of services including business registration, social security, health benefits, and driving license.
You can either apply for NIE at your local embassy before arriving in Spain or visit a nearby police station in Spain to get one. If needed, you can also get NIE by giving the power of attorney to one of your friends, lawyers, or relatives residing in Spain. - Register with the Tax Authority: After receiving your NIE, visit the tax office in your city for business and tax registration. Before visiting the office, set up an online appointment with the nearest Agencia Tributaria. Take your passport, NIE number, and bank account information, if you have one.
At the time, you can fill Modelo 036 or 037 based on the type of business entity you wish to form. Luckily, there is always a civil servant to help you with the registration. Under normal circumstances, it takes only 10 to 15 minutes to complete the entire process. - Open a Bank Account in Spain: A bank account is needed to register with the social security office. There are more than a hundred banks where you can open a business account. Some banks in Spain also offer non-resident accounts geared towards foreign residents. However, most such accounts are in Euros. If you wish to conduct your business in Euros, such accounts can prove beneficial when conducting business outside Spain within the European Union jurisdiction.
Some of the most popular local banks for freelancers include BBVA, Banco Sabadell, and Santander. Besides these options, there are also several international banks such as Barclays, Citibank, Deutsche Bank, and HSBC. It's also important to remember that international banks and major Spanish banks usually have English-speaking staff. If you're not well-versed in Spanish, try not to open an account with regional Cajas that mainly deal in the Spanish language only. - Register for Social Security: After the tax registration, enroll in RETA, Special Regime for Self-Employed Workers. It allows you to make a monthly contribution to the social security fund. At the time of writing, the monthly payment is approximately €289 per month. During the first year, autónomos only pay €60 per month.
Social security enables an individual to get health benefits and receive a pension from the Spanish public welfare system. There are extra allowances for women under 32 and people older than 65 years.
For added convenience, let Xolo take care of your business for a small monthly fee. We'll help you register as an autónomo, take care of invoices, file income tax, and offer expert advice on business matters.
We understand that it can feel daunting at first sight, but your personal manager at Xolo and a comprehensive online tool set will streamline business operations according to local compliance guidelines.
Taxation obligations for you as an autónomo in Spain
Every autónomo in Spain pays a quarterly tax as well as an annual tax at the end of the calendar year. The 20% quarterly tax is the profit generated in that quarter, which is calculated by deducting expenses from the quarterly income. Here's how it works:
Income - Expense = Quarterly Profit
Pay 20% on Quarterly Profit
The quarterly rate is a flat 20% charge on profits. You will need to pay it upfront. At the end of the year, your annual income tax filing will let you receive refunds if you overpaid the tax. Similarly, you will need to pay additional tax if your annual tax exceeds the original 20% rate that you paid upfront each quarter.
VAT obligations for autónomos in Spain
In Spain, an autónomo must charge 21% VAT when selling a product or a service. When calculating your tax, you can deduct the VAT paid on your business expense.
For specific goods and services, VAT is only 4% or 10%. Therefore, it's a good idea to learn about rates that pertain to your niche. If you're selling anything outside Spain within EU jurisdiction, VAT is usually calculated based on the existing rates at that particular jurisdiction. You can check this guide for the complete information on VAT rates and obligations for autonomos in Spain.
Banking for autónomos in Spain
An autónomo needs to open a Spanish bank account because you cannot contribute to the social security fund without it. Before proceeding with this formality, make sure that the bank is among the collaborators with the Treasury and Social Security.
You can find the list of such financial institutions here.
Billing for autónomos in Spain
When sending invoices to customers, autónomos must include specific information in the invoice. The information is critical to compiling relevant information for tax authorities. You can design an invoice template to include the following information:
- Date of the invoice
- Name of the autónomo or business.
- Individual (DNI/NIE) or the business (CIF).
- Product description.
- Total invoice amount
- VAT, where applicable.
Health insurance, pension, and retirement for autónomos in Spain
Access to public benefits is what makes becoming an autónomo so special. If you're a foreigner, self-employment is perhaps the only way of getting into the state healthcare system. You can also include any family members if they live at the same address.
You will be entitled to a pension after the age of 65. In certain circumstances, you may withdraw funds before the age of 65, but it's a complicated process that requires the guidance of a professional. In case of unemployment or injury, it's also possible to claim unemployment charges and health benefits for up to 12 months.
Become and Work as an Autónomo in Spain
When settling into life in Spain, working as an autónomo certainly entitles you to a lot of public benefits. While there are quite a few formalities to address, the overall process is easy. There aren't many roadblocks because Spain ranks above many Western European countries in ease of doing business.
Becoming an autónomo can feels really hard at first but with all the the legal and compliance help, you'll be good to go. If this seems hectic, let Xolo carry all the hassles, take care of your registration, tax returns and invoicing generation. Learn more about our services and get your autónomo dream kicked off.