More and more people who move to Spain choose to start a business.
Some of them do it to get around the usual obstacles and difficulties posed by a not very dynamic labor market like the Spanish one, where getting a good job as an employee is a hard task, even for locals; others do it because they want freedom to work and develop their own projects without having bosses.
In addition, Spain has become in recent years a highly desired destination for so-called digital nomads, who travel from one place to another with their businesses on their laptops.
Before embarking on the process of becoming a freelance worker or sole trader or private entrepreneur (or simply 'autonomo', as the Spanish people say), you should think carefully on the viability of the business you want to create.
If you are going to risk your money in the process, you must be realistic, think coldly, and not fool yourself. Ultimately, this is above all about setting up a business to make a living from it, so the idea has to be viable and marketable.
The heart and the imagination are very important, and surely they also influence success, but do not let yourself be guided only by them, because dreams do not pay bills at the end of the month.
The key questions
Santander bank experts recommend that, before starting, you honestly try to answer the following questions:
- What is the value proposition that I am going to offer to my potential clients?
- Is there room in the market for what I'm going to do?
- What resources (material, financial, etc.) will I need?
- Does it fit with my personal and professional goals?
If you have answered these questions and are still determined to start your business, the time has come for you to create your business plan, which must include your business objectives, the strategies and the resources you will need to achieve them.
The business plan will be very useful if you plan to apply for public aid or go to a bank or other companies or private sector entities in search of financial support.
Once the business conception process is complete, it is time to come face to face with the (always complicated) bureaucracy.
Register as a self-employed person
Spanish regulations currently in force establish that the self-employment registration process basically consists of two procedures that every self-employed worker must go through: registration with the Treasury ('Hacienda', in Spanish) and registration with the Social Security ('Seguridad Social').
Registering with the Treasury will allow you to invoice and fulfill your tax obligations.
Registering with the so-called Special Scheme for Self-Employed Workers, ('Régimen Especial de Trabajadores Autónomos', RETA) of the Social Security is essential to contribute to your pension and have the right to social benefits.
You can carry out both procedures by visiting in person the offices of the Tax Agency (AEAT, for its acronym in Spanish) and those of the Social Security.
You can also do them through the online services of both agencies, but for this you will need a digital certificate or an electronic identity document.
Experts recommend future freelancers to get a Digital Private Individual Certificate as soon as possible. It will help you avoid many trips to the offices to carry out bureaucratic procedures that can be done from your personal computer or smartphone.
Form 036 or 037?
The first of the procedures that you must carry out is to register with the Treasury. This can be done through forms 036 and 037.
The difference between the 036 and the 037 models is the type of business we want to start. Form 036 is longer and more complete (it has more pages and requires more data) because it is used by both self-employed persons and other bigger legal entities (companies). The 037 is the reduced registration form and only applies to freelancers.
However, what has been said above does not mean that both forms are equally valid for the same purposes. In fact, form 037 is not valid for all cases.
Any entrepreneur or self-employed person can register through form 036, but only a few can register through 037. Therefore, you should be careful when choosing the form, because if you register with 037 (the simplified version) you may see your future activity limited in some aspects.
If your activity is going to be limited to providing a service within Spain and without submitting to any special regime or tax, form 037 could be sufficient. But if you are going to carry out operations with other countries, sell remotely or are thinking of setting up a company, you should choose form 036.
In short, if you need to request registration in the Registry of Intra-Community Operators ('Registro de Operadores Intracomunitarios') to have a VAT number, you have to fill in form 036, since form 037 does not include this option. The same applies if you intend to make online sales or issue invoices to other countries.
You can safely download form 036 in PDF format from the Treasury website HERE
Register with the RETA
In addition to the Treasury, the future self-employed person is required by law to register with Social Security, more specifically with the Special Scheme for Self-Employed Workers (RETA).
This requirement also applies to foreign self-employed workers who reside and legally conduct their activity in Spain, specifies the Social Security on its website.
This procedure must be managed before the start of the professional activity. The regulations allow it to be done up to 60 days in advance.
The form used for this purpose is TA0521.
Among other sections, you must choose your National Code of Economic Activities (CNAE, for its acronym in Spanish) and indicate the start date of the activity.
You can safely download form TA0521 in PDF format from the Social Security website HERE
Costs of becoming self-employed
So far, registering with the Treasury and the Social Security has been free. But when you register with the RETA, you have to choose your contribution base ('base de cotizacion'), which is the basis for calculating the amount of the freelance fee that your are going to pay to the state each month.
This amount is also used to calculate the social benefits that you will receive in case of temporary disability or the amount of your pension when you retire.
In Spain, being a self-employed worker is not cheap compared to other countries. For this reason, most of the new freelancers choose the minimum contribution base, which means that a monthly fee of 289 euros must be paid in 2021.
The contribution base can be changed 4 times a year.
The 'flat rate'
However, the new freelancers have an important advantage.
Those entrepreneurs who register for the first time in the RETA, or those who have not been registered in the past two years, can benefit from the so-called flat rate ('tarifa plana'), which means paying only 60 euros for the first 12 months; a 50% discount on the quota between months 13 to 18, and a 30% discount from months 19 to 24.
This flat rate includes protection against common illnesses or non-occupational accidents and professional ones, but it excludes other advantages such as benefits for termination of activity and professional training. If you want to be entitled to more benefits, you will have to contribute a little more to the system.
VAT and Income Tax (IRPF)
To the monthly expense of the self-employed fee, you must add the costs derived from two taxes: VAT and personal income tax (IRPF, in its Spanish acronym).
VAT depends mainly on the activity. The amount that you must pay is calculated by subtracting the VAT on expenses (input VAT) from the VAT on income (output VAT). Generally speaking, the 21% VAT rate is applied in Spain. But in some cases, depending on the activity, a reduced (10%) or super-reduced VAT rate of 4% may be applied.
For the personal income tax, the new self-employed pay a reduced rate of 7% of personal income tax during the first two years of activity and later the general 15% rate.