What is Autonomo?
To be registered as Autonomo in Spain is to legally acknowledge that you are a freelancer, that you are self-employed or that you run an unincorporated small business. 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 exeptions. If you have an employment contract with someone else, then the autonomo rules do not affect you.
Who Should Be Registered as Self-Employed?
The rules in Spain regarding autonomo status are strict. Regardless of whether your earnings are casual and small scale – such as selling on eBay, selling at craft markets, running a Tupperware party, selling make up, or if you do occasional after dinner speaking – you do have 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 autonomo.
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 individual the alternative is a "CB" or "Comunidad de Bienes" which is similar legally to autonomo. The CB is not a legal entity separate from the participants so both or all of the owners will be fully liable for any debts.
Your Classification as an Autonomo
For those who are running commercial and trading businesses, they are known as Autonomo Empresarial. Professionals or freelancers are known as Autonomo Profesional. 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 Autonomo Opposed to Having an S.L Company? (this is a LTD company in the UK)
Because people are reluctant to register, it means many tend to only accept cash-in-hand payments. The disadvantage of taking cash-in-hand payments is that you cannot then declare the income for tax purposes on your annual tax return. This also means you are unable to issue an invoice to your customer for services you have provided and they cannot then deduct the expense from their taxes themselves.
Registering as an autonomo is a really quick, simple and cheap way to make your business legal. By choosing autonomo status, the business will be easier to administrate as there is less paperwork. It is also cheaper to start up and if necessary, wind up.
How to Register as Autonomo 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) will require you to be 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.
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 be breaking the law.
You will need to fill in another form acknowledging your autonomo 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 usual payment is €275.02 per month, with some exceptions, and is paid every month unless your income is less than the minimum wage, which is currently €825.50 per month. Recently however, the Spanish government have reduced this amount to €50 per month for the first 12 months of self employment. (See 2017/18 changes below)
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 "licensia 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. Always take advice if you are uncertain.
Other Obligations for Autonomos
You will be legally obliged as an autonomo 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
- Retain 15% of any invoice when invoicing another autonomo worker or business. This is then paid to the Agencia Tributaria as advanced income tax and then credited when quarterly income tax returns are made. For self employed workers with less than 3 years trading the rate is reduced to 7%.
Important Self Employment Changes In 2017/18
An important government proposal was put forward in 2016 to change the tax laws for self employed workers and generally encourage more people to become autonomo. The law is titled Ley de Reformas Urgentes del Trabajo Autónomo and has recently been approved and updated for 2018.
The new tax laws include:-
- For new autonomo's there is a standard flat rate social security payment of €50 per month for the first 12 months. Then there is a 50% discount (€137.97 to pay) for the next 6 months and a 30% discount (€192.79 to pay) for the following 6 months. After the initial 2 years self employment the full amount of security will apply which would be €275.02 per month. For women under 35 and men under 30, there is a further 12 months of reductions meaning full social security is not paid until after 3 years of self employment.
- New self emloyed workers who are also in full-time employment will receive a 50% reduction in social security payments for the first 18 months and a further 25% reduction thereafter.
- Up to 50% of petrol expenses can be claimed back.
- Up to 30% of electricity, gas, water and internet costs can be claimed back if working from home. Note that you must register your home address as the centre of your business and economic activity in order to reclaim these expenses.
- Food expenses of up to €26.67 per day (€48.08 if abroad) can be claimed back if you have to eat away from home for business purposes.
- There will be smaller sanctions for freelancers who are late paying their social security payments.
There is a calculator that you may use at the page below, which will determine how much you can deduct for electricity, gas and water usage based on the office space at home.
Many people decide to employ an accountant 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. Their service will usually involve submitting quarterly and yearly tax and IVA returns on your behalf.
You can read more about filing your tax returns here http://www.healthplanspain.com/blog/expat-tips/306-how-to-file-an-income-tax-return-in-spain.html
De-registering or Winding up Your Business
The good news is that if you do end up having to wind up your business, your autonomo classification is simple to de-register. You just need to complete the forms you used initially to register - Modelo 36 or 37 in the case of the Agencia Tributaria and the TA 521 for social security.
If you are considering becoming self employed here in Spain, you may want to consider taking out one of our great value private health insurance policies.