Is it possible to combine unemployment and self-employment?
It is possible to combine unemployment and self-employment, but only in certain cases. This post explains the requirements and the ways to apply and receive it.
How to make unemployment compatible with self-employment?
The possibility of making unemployment compatible with being self-employed exists if a person decides to register in the Special Regime for Self-Employed Workers (RETA). This would make it possible to receive money to start the new activity.
In this context, the two situations could be made compatible on a temporary basis or the remaining amount could be capitalised in order to start the activity; there is also the mixed formula of capitalising part of the benefit and collecting the other part in instalments. All three possibilities provide unquestionable support for entrepreneurship.
If a worker becomes unemployed and starts a self-employed activity, he/she can capitalise the unemployment benefit. In this case, the benefit is exempt from personal income tax, provided that the legal requirements are met.
Capitalisation of Unemployment
Exempt income
When a worker becomes unemployed and decides to start a self-employed economic activity, he/she can apply for the capitalisation of the unemployment benefit to which he/she is entitled.
This alternative allows you to have funds available to start your project and, in addition, has tax advantages: the amounts you receive are exempt from tax on your personal income tax.
Capitalisation of unemployment benefits
The benefit can be capitalised in various ways, at the worker’s option (in any of the forms of capitalisation, the benefit will be exempt):
- All at once. A first option is to receive the current value of the benefit in a single payment, after deducting the legal interest rate.
- For the RETA. Another option is to use the benefit to pay RETA contributions. In this case, the worker receives a subsidy each month equal to the RETA contribution.
- Mixed. Finally, the worker can also choose to receive only part of the unemployment benefit all at once and the rest in the form of a monthly subsidy for the RETA.
However, everything must be done in compliance with these conditions; otherwise, this right would not be available:
1. Paying contributions for a certain period as an employee
It is obvious, but in order to be eligible for compatibility, you must have been working as an employee beforehand. Specifically, you must have paid contributions for a minimum of 360 uninterrupted total days before the change, which entitles you to 3 months of benefit. Below this figure, there is no possibility, with some exceptions, for family circumstances.
2. That the dismissal is unclaimed
The dismissal must be in full effect, whether or not it is justified, and you must be receiving the benefit in the ordinary way. If you are in a situation of claiming or contesting the dismissal, you cannot request the compatibility of the benefit with your self-employed status. Remember that cases of claims for unfair or null dismissal are sub iudice, and the benefit collected is provisional.
3. Registering as self-employed for the first time
This option is only available to people registering with the RETA for the first time. If you have already been self-employed before, you would not be eligible for this option. It is important to be clear about this in order to avoid miscalculations. This is based on the fact that it is a measure to encourage self-employment for the first time.
4. Justifying the registration to make unemployment compatible with being self-employed
Anyone who wants to make unemployment compatible with self-employment must justify that they have already registered with the RETA. What is more, you must apply for the possibility of receiving unemployment benefit during the 15 working days following your registration as a self-employed worker. Otherwise, the administration will automatically assume that you have waived the right to receive the benefit.
5. Not working as an employee at that time
The compatibility of unemployment benefit and self-employment is incompatible with other paid employment. This means, for example, that you cannot have a part-time contract. In other words, in these cases, multiple employment is not allowed and would eliminate the right to benefit.
Requirements for making unemployment compatible with being self-employed
Investment requirement
In any case, in order to be able to capitalise the unemployment and for the benefit to be exempt, certain requirements must be met.
Firstly, the money collected in one go must be invested in the new activity:
- If the worker registers as an individual entrepreneur, he must invest it in acquiring the assets and contracting the services he needs to set up as a self-employed person.
- If he/she sets up a commercial company (an SA or an SL), he/she must make a contribution to the company’s share capital, acquiring effective control of the company. In addition, the company must be new or formed within the previous 12 months.
- If you contribute the money to a worker cooperative or a worker-owned company, it is not necessary for the company to have just been set up (it can be one that has been in existence for years), nor is it necessary for you to acquire effective control.
Requirement to maintain the activity
If you start a self-employed activity, it is also necessary that this activity is maintained for at least five years.
If the person concerned contributes the money to a company (commercial, cooperative or worker-owned), it is necessary that he/she does not transfer his/her shareholding before the same period has elapsed.
Beware! If this requirement is breached, the taxpayer must regularise the situation in the personal income tax self-assessment for the year in which the breach occurs, paying the amount not paid at the time plus interest for late payment.
Is it possible to make the benefit compatible?
Yes, it is possible to combine the benefit with being self-employed.
If a worker becomes unemployed and starts a business – as a self-employed person or through a cooperative or worker-owned company – he/she can combine his/her unemployment benefit with the exercise of this activity, although with certain limits (the maximum duration of compatibility is 270 days). But be careful
However, in this case, the unemployment benefit is taxable for personal income tax purposes, so this option will only be of interest if the investment to start the activity is very low or non-existent and the worker is in great need of liquidity.
Therefore...
The option of making unemployment compatible with being self-employed exists and, in some cases, can help a business to get off to a strong start.
Do you have doubts about the practical implementation of this option?
At Asesoría Orihuela Costa we can help you, contact us without obligation!
