Everything you need to know about self-employed in Spain
Being self-employed in Spain is a risky sport, very risky indeed. 50% of the self-employed in Spain quit in the second year of their adventure. Scared? Don’t panic, being self-employed is a long hard process but it has its rewards.
Having an idea that works, having satisfied clients who are happy with your work, helping people is a huge reward. And you might be thinking, I want to make money and this person is talking to me about helping people?
If your only goal is to make money, don’t become self-employed. It will probably go wrong.
The business world has always been difficult, but we believe it is much more so today. If you are thinking about becoming self-employed, read on, it will only take you 5 minutes and it might help you.
What is a self-employed?
A self-employed person is a natural person who works for himself (also to pay taxes) and nobody tells him what to do. He invests in the business and risks his own money, his own time.
He makes all the decisions about his business, he makes mistakes.
To be a good self-employed person, we think you have to be a stubborn fool and a bit crazy to be self-employed. But many people have no choice if they want to survive.
Characteristics of a self-employed person:
- A self-employed must be brave, be daring.
- A self-employed must be afraid of failure, in fact, to succeed in business you have to fail many times.
- A self-employed must not be afraid of work, effort and sacrifice.
- A freelancer must have a good idea. If you don’t have a good idea, don’t innovate, copy (Emilio Duró’s phrase).
- A self-employed has to have a good mouth. Whether you are a salesman, a dentist or a bricklayer, you have to know how to sell yourself.
Recommendation for being self-employed:
- Make preliminary calculations of your expenses.
- Make previous calculations of the prices.
- Don’t waste. Don’t waste.
- Do different things. If you always do the same thing you will get the same results. As Steve Jobs said: Think Different
- Study the market, study the competitors.
- Be patient.
- The paying customer is god.
Failure does not make you a failure, giving up and not trying again does.
How to register as self-employed in Spain?
To become self-employed you have to register with the tax authorities and social security.
This is done by submitting online the registration of the activity with the tax authorities and the notification of the start of the activity to the social security.
Registration with the social security must be done in advance. Registration with the tax authorities can be done on the day of registration.
Requirements for registering with the social security:
- You must have a DNI or NIE number
- Have a work permit.
- Be over 18 years of age
- Have a social security number
- Have an account number accepted by the SEPA system.
- The CNAE of the activity must be provided.
By registering, the self-employed acquire a series of benefits, such as :
- Access to sickness and occupational accident cover,
- Entitlement to unemployment benefit,
- Possibility of paying pension contributions, and
- Access to training services and business advice.
And a number of obligations:
- Pay social security contributions.
- Filing the corresponding quarterly taxes.
- Filing the income tax return
Registering with the Social Security is a fundamental step in order to start a business activity as a self-employed person.
Asesoria Orihuela Costa is a brand created by Patrick Gordinne Pérez, a graduate in Economics from the University of Alicante. Our main objective is to help people.
How to deregister as self-employed in Spain?
Very important for self-employment cancellation
If the business is going badly and you cannot continue with the activity, it is important to present the cancellation to the social security and tax authorities.
If you do not do so, the tax authorities may require you to submit more quarterly declarations (and penalise you) and the social security may demand that you pay the self-employed contributions.
To deregister as a self-employed person, you have to submit two declarations:
- Submit the form 036 for deregistration with the tax authorities or cessation of activity. The NIF, the name and the date of the effective deregistration must be entered. You can file a cancellation with the tax authorities up to one month in advance.
- And the communication to the social security of the end of the activity. The cancellation of the activity can be presented to the social security up to three days after the effective date of the cancellation.
The cessation of activity for the self-employed is a process that allows self-employed workers to suspend their business activity temporarily or definitively.
What is a collaborating self-employed?
A collaborating self-employed person is a spouse or relative up to the second degree who works regularly with the self-employed person.
He or she must pay Social Security contributions to the Special Scheme for Self-Employed Workers (RETA) as a “collaborating relative“.
Self-employed collaborating worker must be of legal age.
If the relative is a minor or is only going to lend a hand, so that the work he/she will do will be sporadic (no fixed hours, no salary…), he/she should not contribute to the RETA even if he/she has reached the age of 18.
The work of the self-employed collaborator must be regular, not sporadic.
In order to be registered as self-employed, the activity must be carried out on a regular basis. Otherwise, it is simply work of friendship, benevolence and good neighbourliness as a favour.
The expense of a collaborating self-employed person is a deductible expense.
If a self-employed person hires his or her spouse, the spouse must also register as a self-employed person (in this case, as a collaborating relative):
- If the self-employed person is taxed in the IRPF in direct estimation, the remuneration he/she pays to his/her spouse will be a deductible expense.
- If he/she also pays the RETA contributions, this expense is also deductible.
However, if the spouse’s regular and continuous work cannot be demonstrated, the spouse’s remuneration will not be deductible.
However, the recipient does not have to declare them as income for personal income tax purposes either.
In any case, the remuneration paid to the spouse must not exceed the market rate corresponding to his or her professional qualifications and the work performed.
In short, do not register your child or relative as self-employed if he or she only helps you sporadically.
What is a corporate autonomous?
A corporate self-employed person is a person who owns at least 50% of the shares of a company and works in it. Corporate self-employed persons can benefit from the flat rate
Or in other words, they have effective control of their company and work in it.
Effective control of a corporate self-employed person
A person is considered to have effective control if he or she owns at least 50% of the capital of the company.
Effective control is also presumed (unless there is evidence to the contrary):
- Whoever owns 50% of the capital by adding together his shares, those of his spouse and those of his relatives up to the second degree who live with him (such as, for example, his children).
- A person who individually owns at least one third of the capital. Thus, for example, a shareholder with 40% will not have effective control if the remaining 60% is owned by a single shareholder, but will have effective control if this percentage is distributed among minority shareholders.
- A shareholder who owns 25% of the capital and also exercises management functions.
Flat rate for the corporate self-employed
Self-employed companies that initially register with the RETA may apply the ordinary minimum base applicable to the rest of the self-employed for twelve months.
They must pay compulsory contributions for accidents at work and for cessation of activity.
In this respect, you will be entitled to unemployment benefit (the so-called “unemployment” benefit for the self-employed) if you cease your activity involuntarily and certain requirements are met: the company must be making losses and you must cease to provide services to it (and you must cease to hold office if you are the administrator).
A self-employed person has to invoice 3 salaries in order to have a salary.
Contribution of the self-employed
Forecast yields
New contribution system from 2023
A new law has established a new contribution and collection system that will oblige self-employed workers to pay contributions based on their actual income.
Thus, if you are self-employed, from 1 January 2023 you will have to report to the Social Security, through the ImportaSS portal, a forecast of the net income that you are going to obtain in the exercise of all your economic activities.
The calculation of the net income will be carried out by deducting from the income all the expenses necessary to obtain it, as well as a deduction for general expenses of 7% (3% for the corporate self-employed).
During the year, self-employed workers may modify their contribution base up to six times to adjust it to the evolution of their income forecast.
Depending on the income forecast previously communicated, the self-employed must choose a contribution base between the minimum and maximum contribution bases corresponding to their income bracket according to the general table of bases (there are tables already established for the years 2023, 2024 and 2025).
If the income forecast is lower than the minimum base of bracket 1 of the general table, the reduced table will be applied.
However, the minimum base for family members of self-employed workers included in the RETA and for corporate self-employed workers may not be lower than that established for contribution group 7 in the general Social Security scheme.
Regularisation of contribution bases
The bases chosen will be provisional, until they are regularised from the following year onwards, according to the annual income obtained and reported by the tax authorities.
The adjustment must be carried out in accordance with the established procedure, taking into account the following aspects:
- Contributions corresponding to months whose contribution bases have been taken into account for the calculation of the regulatory base of any economic benefit of the Social Security system are excluded.
- Account is taken of the reimbursement of contributions to the worker that the Treasury must make in the case of multiple activity.
- It is carried out according to the computable income of each of the activities carried out, in accordance with the provisions of the Personal Income Tax regulations for the calculation of net income.
The regularisation does not affect the contribution rebates obtained for reconciling professional and family life.
Differences in contributions for the self-employed
Once the definitive contribution base has been calculated, the self-employed worker can pay the contribution differences, without any interest for late payment or surcharge, until the last day of the month following the month in which the result of the regularisation is notified to him/her.
In the event that a refund is due for having paid contributions in excess of those due, the Treasury must do so before 31 May of the following year.
Compatibility of unemployment benefit with self-employment
Is it possible to combine unemployment and self-employment?
Those who receive a contributory unemployment benefit -because they have totally and definitively ceased their work activity- and register as self-employed workers with the RETA may combine the benefit with self-employment.
In this respect :
- This compatibility can be maintained for a maximum of 270 days, or for a shorter period depending on how much benefit remains.
- The person concerned must apply for this measure to the SEPE within 15 days from the date of commencement of the self-employed activity, without prejudice to the right to the compatibility of the benefit taking effect from the date of commencement of such activity.
Once this 15-day period has elapsed, the worker may not avail himself of this compatibility.
The performance of full-time or part-time work as an employed person will mean the end of the aforementioned compatibility.
Exclusions from the compatibility of unemployment benefits
However, there are some people who are not eligible for this measure.
In particular :
- People who were last self-employed are not eligible.
- Nor are those who have made use of this right or obtained the single payment of unemployment benefit (the capitalisation) in the 24 months immediately preceding.
- Likewise, those who set up as self-employed workers and sign a contract for the performance of their professional activity with the company for which they had provided their services as employees immediately prior to the start of the legal situation of unemployment (or with a company in the same group) will not be included.
Among other things, receipt of unemployment benefit or allowance is compatible with part-time employment and self-employment for a maximum of 270 days.
Are the self-employed entitled to unemployment benefits?
Self-employed persons are entitled to unemployment benefits
If you are self-employed, remember that you can receive unemployment benefit (equivalent to “paro”) if you pay contributions and can prove that you have ceased to be self-employed.
However, the requirements for accessing this benefit have been relaxed since 2015:
- One of the reasons for which you can receive this benefit is if you cease your activity for economic, technical, productive or organisational reasons.
From now on, this reason will be given (among other cases) if the cessation is due to a loss of 10% of income during a full year (previously, losses had to be 30%, or 20% in two consecutive years).
- Contribution . Until now, in order to be entitled to this benefit, you had to contribute for cessation of activity (2.20%) and for professional contingencies. From now on, however, it will be enough to pay contributions for cessation of activity (in addition to the compulsory contribution for common contingencies).
The requirements for a self-employed person to collect “unemployment” have been relaxed. Moreover, it is no longer necessary to pay contributions for occupational contingencies.
What is the flat rate for the self-employed?
Self-employed Flat rate
Reductions are established in the contribution – flat rate – for starting a self-employed activity.
During the 12 months following registration, self-employed workers who so request may pay a reduced contribution for common and professional contingencies, and are exempt from paying contributions for cessation of activity and professional training.
The reduction may be extended for a further 12 months when the net annual income is less than the minimum wage. The contributions corresponding to the first 12 months will not be subject to regularisation.
The amount of the reduced contribution will be, between 2023 and 2025, 80 euros/month.
From 2026 onwards, the amount will be established in the General Budget Law.
This reduced quota replaces the previous flat rate of 60 euros/month (until 2022).
The Self-Employed Workers’ Statute Law (LETA) is also amended to adapt the rebates on Social Security contributions to the new contribution system and to include a new rebate of 75% of the contribution for common contingencies for caring for a minor with cancer or serious illness.
Find out here how much flat rate you will pay in 2o24
What is a bogus freelancer?
A bogus self-employed person is a worker who is registered as self-employed but in reality performs the functions of an employee.
Many employers have no choice but to give you a job if you are registered as self-employed, but you do not provide the means of production, you are not in charge, you do not decide anything about the business.
It is considered a false self-employed when a self-employed person invoices 70% of his income to a single client.
Social security and the financial obligations of the self-employed are complex issues that require attention and understanding by all involved. It is essential to be informed about the requirements, benefits and legal changes in order to make the right decisions in relation to self-employment. However, the question is whether the current system is fair and equitable for all self-employed, or whether it needs to be reviewed and adapted to the needs of today’s labour market.
