What is Autónomo?
Autónomo is the tax and social security regime for self employed workers in Spain. You join the regime if you are for example a sole trader, freelance consultant, running an unincorporated business, or small to medium sized company. The Spanish authorities require such business entrepreneurs to register and pay taxes as well as charge IVA (VAT) to their customers. Most businesses, regardless of their level of income are obliged to charge IVA in Spain, although there are some exceptions.
Who Should Be Registered as Self-Employed?
The rules in Spain regarding autónomo status are strict. Regardless of whether your earnings are casual and small scale – such as selling on eBay, selling at craft markets, selling make up, or if you do occasional after dinner speaking – you are supposed to register.
Bar-owners, people working as IT or Engineering consultants, English teachers or anyone running their own small business that invoices clients or customers, are all responsible for registering themselves as autónomo. Where your earnings are more sporadic and you are not actually earning a proper living then there are some exemptions.
For a partnership of more than one self employed individual, the alternative is a “CB” or “Comunidad de Bienes“. The CB is not a legal entity separate from the participants so both, or all of the participants will be fully liable for any debts.
Your Classification as an Autónomo
Those running commercial and trading businesses are defined as autónomo societarios. Sole traders or freelancers are autónomo persona fiscica. There are then sub-classifications within these two broad categories depending on the line of business you are in, or your professional activity.
What Are the Advantages of Being Autónomo?
Being registered as autónomo, allows you to carry out your profession or run your business, as if it were a company, but at a much lower cost and with a lot less administration. You can invoice your customers, offset business costs, set up accounts with suppliers. employ people etc, much the same as you can with company.
It’s a really quick, simple and low cost way to get a business started and trade legally.
How to Register as autónomo in Spain
There are two parts of the process to register as an autonomo. Firstly, you register with the tax office (Agencia Tributaria or Hacienda) and secondly, you join the autonomo social security system (Regimen Especial de Trabajadores Autonomos or RETA).
In order to join the autonomo social security system (RETA), you will need to be registered in the social security system already, but this registration process is also straightforward.
The Agencia Tributaria would expect you to be registered as a resident taxpayer so you need to complete the Modelo 36 form (less usually Modelo 37) and then file it with the Hacienda. The form asks you to stipulate who you are, where you live, and to outline the sort of business activity you perform. You fill in where your business is located and whether you will be paying VAT (IVA) as it is known in Spain.
Whether you will be paying VAT or not will depend on the kind of product or service that you are charging your customers for. Some products and services are exempt from VAT. There are also some exemptions when invoicing businesses that are based overseas. Check with an accountant to confirm whether you should be charging VAT/IVA or not.
The form should be accompanied by proof of identity, usually your passport and you will need to provide your NIE number.
Alternatively you can ask an accountant or gestor to collect all of the relevant information and they will go with you to register at the tax office.
Autónomo Social Security Contributions
Once you are registered for the purposes of tax and VAT, you need to register for social security purposes. The Spanish Social Security system is very much like the National Insurance system in the UK.
Unless you make the necessary payments you will not be entitled to access public health facilities, receive a pension or sick-pay or paid maternity-leave and you will also be breaking the law.
You will need to fill in another form acknowledging your autónomo classification. This is because different categories of employment trigger different social security payments, so if your work is deemed to be dangerous, then you will pay more in contributions.
The standard payment is currently €283 per month. This is based on a minimum income base of currently €944 per month. There are incentives for self employed people registering for the first time. In Andalucia new autonomos can now benefit from a reduction of their social security payment to €60 per month for the first 24 months of self employment. The payments then rise in increments every 6 months to reach the full payment amount.
Other steps you may need to take will entirely depend on the type of business you run, so for example, if you operate a premises that is open to the public you will need an opening licence called a “licencia de apertura” which can be obtained from the local town hall. You will need to be inspected before the license is granted and you will pay fees and be asked to provide evidence of any documents or certificates that the town hall demand.
Home based licenses are usually not a problem if it is a simple internet based business, however, if you run a business from home that employs people or impacts on other people, such as a crèche, then you will require additional certification.
Any business with employees is usually not permitted to operate from a residential apartment block, although some office based employers such as lawyers and accountants may have offices on the first floor of a residential building, but no higher.
Other Obligations for Autónomos
You will be legally obliged as an autónomo to:
- Provide quarterly tax and VAT (IVA) returns
- Keep up with your monthly social security payments
- Issue properly drawn-up invoices, as appropriate
- Keep accounting records according to the legal standards of Spain
- Pay up front tax retention on invoices from other autónomo workers or businesses .
Recent Self Employment Changes
In the last 2 years there have been a lot of changes to the tax and social security regime for self employed workers. This due to rules being changed with the aim of encouraging more people to register, by making it easier, and less expensive for new self employed workers to get started.
Some key changes are:
- The reduced introductory flat rate social security payment of €60 per month.
- Up to 50% of petrol expenses can be claimed back.
- Up to 20% of electricity, gas and water costs can be claimed back if working from home.
- Smaller sanctions for freelancers who are late paying their social security payments.
- Autonomos can claim up to €26.67 per day for food as an expense if working away from home while on business. This increases to up to €53.34 per day to cover accommodation if their work required and overnight stay.
Many people decide to employ an accountant or gestor to do their accounts for them. As a guide, an accountant in Spain will usually charge around 60 Euro’s per month to do this on a retainer basis. The service will include submitting quarterly and yearly tax and IVA returns on your behalf, but these will usually be billed for at an additional cost.
De-registering or Winding up Your Business
The good news is that if you do end up having to wind up your business, your autónomo classification is simple to de-register. You just need to complete the forms Modelo 36 or 37 that you used initially to register, to notify the Agencia Tributaria, and the TA 521 for social security.
Need to get set up as autonomo? Have a look at our Autonomo Made Easy services.