Self-employed and small businesses in Spain

When you start a new business and are self-employed, you need an expert team to provide you with the assistance to become a Sole Trader (autónomo).

If you are starting a Limited Company the tax structure will be different and we can help you decide which is the best for you, The most common form of starting a new business is to be self-employed, and there are many reasons this maybe more cost effective, for example, lower costs of training and a simple book-keeping system. It is important to understand that when you are self-employed any business debts are paid solely by you.

The choice of being self-employed or a Limited Company should be deliberated over very carefully.

Tax issues and all accountancy paperwork can be very time-consuming and an expert adviser can help you run your business more effectively by reducing the burding of your task, whether you are Self-Employed or a Limited Company.

You will need to register with The Spanish Tax Office, Social Security, the Town Hall and some other Government departments when opening a new business in Spain.

A new business needs specialist advice to help you to deal whith problems that may arise, leaving you to concentrate on the successful running of your business.

A Tax Adviser can answer your questions such as:

  • How to file VAT and Taxes?
  • Can I claim all my expenses?
  • When is the first tax bill to be paid?

We can provide the services necessary:

  • Tax and Financial Planning.
  • Payroll and Employee problems.
  • VAT registration.
  • Book-keeping.
  • Received and issued invoices (Bought Ledger and Sales Ledger).
  • Preparation of monthly, quarterly or annual profit and loss sheets.
  • Tax declarations.
  • Administrative tasks.

Change on the contribution base for self employed

In case you have already decided to register as an autonomous worker, you must know that you are responsible for your contribution before the Social Security.

The contribution base derives from the “theoretical” salary you choose as an autonomous worker (which fluctuates between a minimum and a maximum each year). If you modify that amount you can apply for a change in the contribution base adjusting the same to the regime indicated for such operation.

Most autonomous workers choose the minimum contribution base during their first years of activity; however, the same can be changed (in the event of a potential retirement for example) up to four times a year. It is worth mentioning that the payment of a higher contribution implies “a higher income in the event of illness or disability.”

Review the age limitations for each case: autonomous workers who are 47 or younger can choose freely their contribution base (within the minimum and maximum). In case of those who are 48 or older, they shall have a contribution base ranging between 963.30 and 1,964.70 Euro/month.

On the other hand, autonomous workers who paid “in any regime of the Social Security System” before turning 50, shall comply with some specific rules that will make them choose a contribution that can reach the 1,964.70 Euro/month.

To process this modification, you can visit the Administrative Offices of the Social Security Treasury or through the web-room, making sure that:

You access the service only if you have a digital certificate included in the list of “admitted certificates.”

Make sure that your identification date matches the data on the Social Security database.

Appear as a “registered” individual at the time to use the service.

It is important to clarify that, even if the change is requested, if afterwards the interested party doesn’t wish to move forward with the change, the individual can cancel the request within the same period, with the cancellation being effective as of December 31 of the year when the request was presented.

Associated Work Cooperatives for autonomous workers

Getting started with your own company is always a very interesting option, just for the opportunity to have a job. However, as it happens with any investment it generates fear and uncertainty.

Now, this initiative can reach a middle point that sets a pause while you comply with the long list of paperwork and requirements, including the time required to obtain the same and other procedures to qualify as autonomous worker.

The point is to rely on the services of associated work cooperatives, an option to expedite the invoicing due to specific works performed occasionally. In general, the same are quite useful for freelancers who are barely getting started and have a very low income, few clients and are not registered in the Social Security in a regular manner.

A first step to apply for this type of invoicing is to be a member (partner) of the cooperative. Let’s look at the pros and cons of becoming a member of this system:

Advantages

The worker is registered only during the days when he/she is performing the work activity.

A great advantage is that being a worker registered “as self-employed (cooperative)” the cooperative is responsible to present the declarations corresponding to the VAT, the calculation of the IRPF (Income Tax Return for Individuals for its acronym in Spanish) and the Corporate Tax.

Freelancers can invoice several specific jobs that are not substantially paid.

Said cooperatives usually offer free consultancy services in work-related, legal, fiscal and accounting matters for its partners.

Disadvantages

The assistance, bonifications and discounts enjoyed by autonomous workers cannot be enjoyed by those who issue invoices as workers of a cooperative.

When the partners/members of cooperatives issue invoices they cannot discount neither the “proportional portion corresponding to their housing” (when they work from home), nor the services and other supplies necessary to develop their profession.

At the end of each job, the cooperative deposits the total of your work after discounting costs and taxes. Therefore, the members must pay a monthly quota (that can range from 80 to 100 Euro), management expenses, the costs of Social Security (based on the days of work), and IRPF (2% established for an annual income of 11,700 Euro), among others.

If you still have doubts in terms of becoming an autonomous worker or invoicing through cooperatives, the decision will certainly depend on the number of invoices issued, and the frequency to issue the same.

he majority of the small companies set up as a Limited Company. Using this kind of legal procedure to start a business is very common when the entrepreneur wishes to protect his or her personal assets from the business.

With regard to taxation running a small company is not easy. The legal obligations are more complex than being Self-Employed. The first thing necessary is to sign the Formation Title Deed in front of a notary, register the Company in the Mercantile Register, the Spanish tax authority and the Social Security office.

When your small company starts trading you must notify the Tax Office. The company is liable for Corporation Tax, but depending on the nature of the business, the fiscal obligations could be different.

For each period the Accountant must calculate the taxable profit to pay in the Corporation Tax, also having to prepare the book-keeping and the annual accounts for submitting to the Mercantile Register.

Our Accountants can prepare your company tax returns. The Spanish tax law is very complicated and a specialist on tax affairs is necessary.

Expert Accountants can answer questions such as:

  • How much is the rate of Corporation Tax?
  • When do I have to file the taxes for my small company?
  • When do I have to pay VAT?
  • When do I distribute the dividends?

We provide the following services for Small Companies:

  • Tax and Financial Planning.
  • Payroll and staff problems.
  • VAT registrations.
  • Tax inspections.
  • Book-keeping ( All book entries, Trial Balance, Balance Sheet, Profit and Loss Accounts, annual accounting report.
  • Preparation and submission of monthly, quarterly or annual Tax declarations for the companies (Corporation Tax).
  • All administrative tasks.

Monthly VAT Returns in Spain

Until now, companies and self-employed professionals could request the return of the VAT tax at the end of each year, in the tax return form of the last term of the year. This could cause problems when a company had just begun to exercise the professional activity or when they had performed a big investment, as there was a difference in the payable VAT and the deductible VAT.

In order to avoid this unfair situation, the Spanish Tax Authorities now allow taxpayers to request the VAT return at the end of each term. This monthly VAT return was available only for big companies and exporters until 2009. But now, the Spanish Tax Agency allows all firms and self-employed workers to benefit from the monthly VAT return. The only requisites are that the taxpayer mustn’t carry out activities that are taxed under the simplified regime and be up-to-date on their taxation obligations in Spain.

If you want to register for the monthly VAT return, you must sign up in the REDEME (Registro de Devolución Mensual) during the month of November. This can be done by filling form 036 (checking box 129) or form 039 (checking box 12). You don’t need to sign up in the REDEME if you are already registered as an exporter or other economic operator, as these are automatically included in the REDEME. If you find difficulties during this process, don’t hesitate to consult a professional solicitor or accountant.

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