If you are an expat relocating to Spain or already living in this beautiful country, and looking at work opportunities as an entrepreneur, you most likely have heard of the word “Autonomo”. In Spain it means Self-Employed or Freelancer. If you wish to set up a small business or work as an independent professional in Spain, you need to be registered as Autonomo. Spain counts with more than 3 million Autonomos, among which are both Spanish and expats. Most small businesses, for example in hospitality sector, or independent professionals, such as builders, language teachers, consultants, small doctor practices, shops, etc are set-up as Autonomo or small SL (limited companies). Registration as self-employed individual or freelancer is also a popular route for many expats relocating to Spain and having difficulties to find employment.
To be able to register as Autonomo you either need to be an EU citizen or have a required work permit. The registration process itself is reasonably easy and straight forward. You need to have a NIE number and then get your business activity registered with Hacienda (Spanish Tax authorities) and with the Social Security office. You may try to attempt doing the steps yourself, however using the services of an independent accountant will save you time and unnecessary stress and will secure that your registration procedure as well as your future quarterly tax reports are performed correctly. Yes, once your activity is registered, you will have to start paying taxes and social security contributions.
Depending on the type of your activity, the size of your business and your commercial projections, setting up an SL (limited company) might be a more favourable scenario as it provides better tax optimisation opportunities, however the set-up process is lengthier and more costly. An advice of a knowledgeable accountant is invaluable in this situation and will save you costs and time.
Like with everything, setting up Autonomo has its Pros and Cons. Let’s look at some of them.
- The registration process is easy and straight forward, both for setting up and for closing the business. Depending whether you already have your NIE or not, it will take between a few days and two-three weeks to have your business set-up and running (in case you need commercial premises the licencing procedure may take longer). The registration procedure is not costly either. And in case it comes to closing the business, the de-registration is simple as well.
- The social security contributions which you are obliged to pay from day one, entitle you for state health care and count towards your pension cover, however it is worth mentioning that you need to pay a minimum of 15 years into the system to be entitled to a state pension. The health care from the other hand is available to you and your direct family from day one, which is a substantial benefit.
- Although the social contributions are not small (count with around 285€ monthly), there are substantial subsidies for “new Autonomos” – those who register for the first time. In year one you will only be paying 60€ a month, and it will gradually increase in year two until it reaches the basic rate from year three. Discounts on monthly rates are also available for those who have not been registered as Autonomo in the last 2 years, although had been operating as freelancers prior to that, and wish to restart commercial activity.
- Your tax obligations start from day one, and as Autonomo you need to submit quarterly tax reports, both for IVA (VAT) and your income tax (IRPF). Every quarter you pay an advance IRPF tax on your income at the rate of 20% and then the following April when you submit your annual declaration, your overall tax will be re-calculated based on the annual income and the taxes which have been paid already. Please note, Autonomo’s income is being taxed based on the progressive scale, starting from 19% till 45%. This is a disadvantageous comparison to other business forms such as SL (limited companies) where the income tax rate is flat, and the company is being taxed only once a year.
- The obligation to pay social security contributions doesn’t stop, even if you do not have any income. Unlike in some other countries where this rate is linked to the level of income the freelancer receives, in Spain it is a fixed rate, and being close to 300€ a month, it is a substantial cost to carry especially in the lower income months
- Autonomos in Spain receive quite little subsidies and/or Governmental support. If you wish to be covered for sickness, accidents or unemployment, you need to increase your monthly social security contributions, which are quite high already.
In overall, if you are an expat having a business idea or entrepreneurial project, or operating as an independent professional, the fastest and easiest way to get your business off the ground will be through setting yourself up as Autonomo – the route which has proven to be successful for many expats living in Spain.