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Self-employment Spain

Definition-Responsibilities

Un trabajador Autonomo is a freelance or self-employed worker. There are 2 basic types: the freelance professional (actividad profesional) and the sole trader (actividad empresarial). The registration process and responsabilities are the same for both but there may be some differences with regard to tax requirements. For example, generally speaking, a freelance professional who invoices a company in Spain will have tax withheld on their invoice (retencion) whereas a sole-trader will not. The obligation to file periodic tax returns may also vary. In terms of responsability and, in contrast to the limited liability company (Sociedad Limitada o Anonima), the autonomo's economic liability is not limited in that he or she must respond personally for all debts accrued through their professional activity. In practical terms, this can mean that their personal assets (banks accounts, vehicles, properties etc) can be held as collateral for any professional debt incurred.

Requirements

In order to register in Spain as autonomo, you must be in possession of an NIE certificate. If you are an EU citizen, then this along with your passport is sufficient. If you are a non-EU citizen however, you must have a work permit which enables you to work freelance.

Registration

In order to work freelance in Spain you need to register as such for both tax and social security. To register for tax as a freelance or self-employed worker, you must fill out the required form in the Agencia Tributaria or tax office. Amongst other things, you will have to register for a particular activity using the applicable codes (epigrafes). Additionally, you need to indicate the applicable ongoing tax obligations (income tax, VAT etc). Some professional activities (e.g. education) are VAT exempt, so it is important to indicate such when registering. Once you have registered for tax, you will then need to register for social security using the appropriate form and including a copy of your tax registration form.

Taxes

In general, the 2 main taxes you will have to file are income tax (IRPF) and VAT (IVA). Generally speaking, you must file 4 of these a year, each one corresponding to a particular quarter (January-March, April-June, July-September, October-December). The filing period is between the 1st and 20th of the month following the quarter end (April 1-20, July 1-20, October 1-20, January 1-20). It is important to file on time as the penalties for late filing can be considerable. Regarding IRPF, you will be required to submit your calculations and make a payment representing 20% of the difference between your income and expenses less any tax withheld. The 20% payment does not represent a definitive tax rate however just an up-front payment or payment on account. Your actual income tax rate will only be established when you file the annual income tax return in May/June of the following year. The definitive tax rate will be established taking into account your income from ALL sources as well as any personal deductions available to you. Your taxable base will then be subject to a sliding scale of tax brackets. Any difference between the actual tax to pay and the up-front payments already made will be made good in the annual return leading to either an additional tax payment or an application for a refund on amounts already paid.. Regarding IVA, you simply have to pay the difference between the IVA included in your invoices and that paid out in your expenses.

Social Security

As a freelance or self-employed worker, you are required to make the necessary social security payments yourself. As of 2014, these amount to 261,83 euros/month. All new autonomos have reduced social security payments of 53,07 euros/mth for 6 months, then 130,91 euros/mth for the next 6 months and 183,28 euros/month for the next 6 months (12 months for under 30's or women under 35). As in other countries, your social security payments are contributions towards both your pension as well as sickness benefit. They also entitle you to make use of the national health service. Recent changes also allow for unemployment benefit for self-employed workers on payment of an additional monthly and in compliance with the the general minimum conditions that give rise to such a right (e.g. minimum of 12 months' contributions.)

Invoicing

As a self-employed worker, you will need to issue your own invoices to your clients. The basic requirements for invoices in Spain are that the parties-supplier and client-are clearly identified, including their full name, tax number (NIF, NIE or CIF), and address. You will also need to clearly specify the service or product you are selling, the base amount of the sale, the applicable taxes (IRPF and IVA) and any discounts or other deductions included. Generally speaking a freelance professional invoicing to a company registered in Spain, will be required to include withholding tax (retencion) in their invoice which is a tax deduction taken from the base amount of the sale which your client pays to the tax authority on your behalf. This tax is then deducted from your tax bill when filing your quarter's taxes.

Expenses

As a rule of thumb, any expenses necessarily incurred in the carrying out of your professional activity can be considered deductible for tax purposes. In the case of a tax inspection, it is important to have the necessary justification for such by holding on to your expense invoices (N.B. receipts alone are not enough). There are a couple of specific aspects that should also be borne in mind: 1) in general food, hotel and travel expenses are not deductible unless they are incurred outside of the community you are registered in. Depending on the activity, food expenses incurred can sometimes be included when they have been incurred for the entertaining of clients. 2) Home office: some freelance professionals register a home office which can allow them to deduct a certain percentage of their household bills (normally c.30%). This would include rent, electricity, phone, water, gas etc.

Deregistration

The process of deregistering is the same as that for registering just the other way round. You use the same forms for both tax and social security simply indicating the date on which you will cease operating as a freelance worker. Once again, you must first deregister for tax and thereafter social security.


To find out how Spainwide can help you become self-employed, please click here

Updated March 2014