Self-employment in Spain
Starting up in business in Spain, requires careful consideration to ensure you meet all the compliance requirements. It's easy to get carried away and rush into starting up your business without taking the time to research into the Spanish environment, or even without seeking professional advice. It's amazing how many foreign residents in Spain will not take the same level of care in setting up their business in Spain as they would in their own country. Although Europe has been working towards harmonization for several decades there are still important differences in the amount of compliance obligations imposed on businesses, so its vital that you are fully informed before you start trading.
As setting up a registered company in Spain is still a lengthy and costly process, many people decide to start trading as a self-employed individual and set up an 'SL' company if necessary further down the line.
If you have considered all the options and concluded that self-employment is the best way for you, this is what you should expect:
Registering with the Tax Office
It's important that you inform the tax office that you will be commencing a business activity, before you start trading. This is done via a census return where you will inform the tax office of the following information:
- Name, address and identification number
- Date of commencement of trade
- Description of activity to be carried out
- Whether your activity is subject to VAT or falls under one of the special categories
- The type of profit calculation and taxation system applicable to your trade (some trades fall within business modules that are taxed at fixed rates regardless of volume of business)
- Whether you are obliged to present quarterly returns on your profits to date
- Whether you have business premises, and if so disclose full details
- Whether you will be importing or exporting and as such wish to be registered on the EU traders list
Please note, you must not start trading in any way before registering in this way including making sales and taking orders. It is an obligation by law to notify the tax office of your commencement of trade on the first day of your activity. If you fail to do this you may be subject to a fine. In addition, any expenses incurred prior to registration will not be tax allowable in respect of your business profits.
After you have registered with the tax office, you then need to notify the social security office of your commencement of trade, and register as a self-employed individual. From the moment you register you will be liable to pay your monthly national insurance contributions so this must be factored into your monthly expenses.
Forewarned is Forearmed
Many of the problems which businesses face when starting in business in Spain for the first time arise due to a lack of awareness regarding the local compliance system. All the information is out there for you, so make sure you have understood all the aspects that are relevant to your particular trade before you start. Being equipped with the essential information will greatly reduce the headaches when you start trading. The internet is a fantastic resource for information, but make sure that the source you are looking at is current and if you are in doubt always ask. Obtaining quality professional advice will play a key role in your chances of success.
There are governmental organizations which have implemented programs designed to support many different initiatives, such as self-employment, employment creation, innovation, equal opportunities, business improvement and growth. There are a number of grants that may be applicable to your particular circumstances and this can be an excellent way to source funding.
If you want to consider this route, seek the proper advice and check what the requirements are. In the case of individuals who are considering becoming self-employed, for some types of grant it is important that any grant application is made prior to the commencement of trade, so it is important to be aware of this before you start trading.