Self-Employed in Spain to Beat Brexit

  • Francisco
    With more than 20 years legal experience, Francisco leads a multi-disciplinary law firm which comprises ten lawyers working in their specialised fields. Assistance in all major areas of the law are offered including property law, contract breach/debt recovery, business formation and taxation as well as civil matters such as family law and inheritances.
  • Ramon
    Ramon speaks excellent English and over the last 10 years has provided expert legal advice and representation in the following areas: property conveyances, inheritance, family law, and business formation. His firm also provides accounting services to businesses in Spain.
  • Miguel
    Miguel is an accountant with more than 20 years experience assisting English-speaking business customers in Spain with setting-up and managing their businesses. The objective is always to optimise the chances of success and therefore Miguel will advise not just on the most tax efficient options but also the most appropriate business structure for each client - whether self-employed or limited company.
  • Carlos Rodriguez del Valle
    Carlos
    Carlos is a highly qualified and experienced bilingual lawyer with dual US and Spanish citizenship. He has obtained batchelor and masters degrees via attendance at a number of prestigious universities including the Universities of Navarra, Leiden and Cambridge, The Hague Academy of International Law, Holland and the IESE Business School in Barcelona. Carlos specialises in the following areas: International Law, Company Law, Civil Law (Property/Family Matters), Administrative Law and his firm provides accounting services.

A common concern among those considering a move to Spain is whether they should seek to open a business in Spain as soon as possible in order to ‘establish’ themselves there. Unfortunately there is no definitive answer to this question. Ultimately both the public and the business world are dependent upon the outcome of negotiations at a governmental level.

That said, there appears to be a widespread belief taking root, that those who are already resident and working in the UK, regardless of their nationality, shall be permitted to stay, and that this will be reciprocated for British citizens living and working in Europe.

It would therefore seem prudent for British citizens planning a move to Spain, and planning to work while here, to consider doing so as soon as possible. It is also important that they register as living locally by way of getting listed on the local padron (ie register with the local Council) and obtaining an NIE number, then becoming either self-employed or setting-up a limited company – according to preference and circumstances. Moving to Spain but failing to register as described could leave an individual in the worst possible situation of having accumulated considerable expense in moving to another country, but not being able to stay beyond a certain date in the future.

While there can of course be no guarantees, it seems that the best way to ensure the least problems in the future, is to become registered as soon as possible, and ensure that the registration process is followed diligently. Advocate Abroad can of course assist with the entire process.

Apart from the above, the main decision you will need to make is, as it always was – when setting-up a business in Spain, should you set-up a limited company or as a sole trader?

Both have benefits and drawbacks. Here we will look at the differences between the two so that you can decide on which is the most appropriate for your business in Spain.

 

Sole Trader v Limited Company

Sole traders in Spain are known as ‘autonomos’ and those who are just starting-out and where the income is likely to be low tend to choose this route.

Why?

Mainly because it is less complex and more economical to both set-up and  run. For example, setting-up as an autonomo does not require €3000 of capital as would be the case with a limited company in Spain.

 

Fiscal Obligations

As in other countries, whether your business is classed as ‘autonomo’ or as a limited company there are a number of fiscal obligations that the owner of a business in Spain will have.

Most businesses will have an obligation to make VAT (in Spain this is called IVA) and Income Tax returns. Of course if you decide to create a limited company then you will also have to make a company tax return (impuesto de sociedades) as well as file the annual accounts with the Company’s Register.

A company will need to retain up to 15% of any invoice presented to it by a professional/autonomo and file a return.

These extra obligations mean that the cost of maintaining the company are higher than where a sole trader is concerned.

 

Social Security Obligations

As an autonomo or sole trader you will need to register with the local social security office and pay contributions each month. These contributions tend to be significantly higher than in other northern European countries with a current minimum of approximately €250 per month payment, regardless of income.

There are some reductions for those under 30 years of age or a temporary discount for example where the person has been unemployed and has decided to become self-employed.

In the case of a limited company there is an obligation to make social security contributions on behalf of an employee of 24% of their income. Where there are no employees of the company i.e. a single director company then that director must register as an autonomo and pay those social security contributions.

 

Liability

Just as elsewhere, one of the major differences between the two forms of business is that creating a limited company ensures limited liability to the owner of the company. If as a result of the operation of the company a financial liability should arise, then often this is limited to the amount of capital in the company.

As a matter of law in Spain the minimum level of capital that any company can have at any time is set at €3000 though this is sometiimes disrgarded by less scrupulous business owners.

One of the major drawbacks of registering as an autonomo is that you will be personally liable for any debts or losses incurred by your business and any personal assets could be at risk if your business is in financial trouble – either as a result of damages owed to a client or failure to pay due taxes and social security contributions.

If you would like to discuss your business plans in Spain in greater depth, contact us on or telephone  +34 932 20 44 40 (Spain) or 0800 098 8033  (UK), or via the email form below.

 

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