Registering as a Freelancer in Spain: A Complete Guide for Foreigners
Going freelance can feel daunting whichever country you live in. And when you’re relocating to Spain - or have recently moved here - it’s sometimes hard to know where to begin.
But don’t worry, you’re not alone. There are currently around 3.2 million freelance workers in Spain. And if you fancy joining them, here’s what you need to do to become self-employed in Spain.
What is a ‘Self-Employed Worker’ in Spain?
In Spain, the term given to a self-employed or freelance person is autónomo, which means they conduct economic activity for profit on a regular basis.
The work carried out is done independently and without an employment contract, and payment is made following the issuance of an invoice, rather than receiving a fixed monthly salary from an employer.
Autónomo workers are required to pay personal income tax, which, in Spain, is called Impuesto sobre la Renta de Personas Físicas - or IRPF for short - and they are also responsible for submitting quarterly tax returns.
In Spain, some professions requires a special certification or qualification before going freelance:
Someone whose practice of an economic activity is not subject to specific professional qualifications, such as a degree or certificate of proficiency.
This encompasses job roles like chefs, salespeople, or artists.
Professions with special requirements
Someone who needs to meet the established requirements to access and, hence, practice the profession.
Examples range from professional service jobs such as lawyers, doctors, and architects to roles such as electricians or diving instructors.
What are the Advantages and Disadvantages of Being Self-Employed?
Let us break down some of the main pros and cons of becoming a freelancer in Spain:
- It is the cheapest way to set up a business in Spain with no initial investment required.
- You have the freedom of being your own boss, can be in control of your own schedule, and the location of where you work.
- The process to become autónomo is relatively simple, in comparison to setting up other types of businesses.
- You don’t have the security of a fixed salary or the same protection of employment laws and unions that apply to those in full-time jobs.
- No distinction is made between your business and personal assets, meaning you are responsible for any debt acquired as a result of your work activity.
- Since tax is charged at a progressive rate, when total revenue surpasses €60,000 per year, it is best to consider setting up a company.
How to Become Self-Employed in Spain
EU nationals are automatically eligible to work in Spain, without the need for a work visa.
EU citizens do need to apply for a NIE (Número de Identificación de Extranjero), which is the legal number required by every foreign resident who does not have Spanish citizenship.
This number allows you to participate in official processes, such as opening a bank account or paying taxes. Your NIE number will also serve as your NIF (Número de Identificación Fiscal), which is your tax identification number.
Citizens from outside the EU need to apply for a visa at the Spanish consulate in their country of residence.
If you are legally in Spain, then you will need to apply for a permit. To know what's best for you, it is better to reach out to a professional.
Tax Registration for Self-Employed Workers
Every freelancer is required to register their business and professional activity under the Economic Activities Tax (Impuesto de Actividades Económicas - or IAE for short).
To do this, you first complete the Modelo 037 - a form that confirms your intention to start doing business, along with the category of your activities. The Modelo 037 is a simplified version of the Modelo 036. Next, make an appointment at your local office of the Tax Agency (Agencia Tributaria).
If you aren’t yet registered to pay personal income tax in Spain, you will also need to complete Modelo 030.
As mentioned above, IRPF tax is charged at a progressive rate for freelancers, which starts at 19% and goes up to 45%. Once you begin earning more than €60,000 per year, it could be time to consider setting up a company instead.
The amount of tax you end up paying as a freelancer depends on the category of activity you signed up for under the IAE, and the amount you have earned above your annual personal tax allowance, which is currently €5,550.
Registering for Social Security
Within 30 days of registering for tax, you must register under the Special Regime for Self-Employed Workers (Régimen Especial de Trabajadores Autónomos), otherwise known as RETA.
Please note, those professionals belonging to an association, such as the bar associations, can enroll in mutual insurance (Mutualidad de Profesionales) as an alternative to the general regime described.
This is the Social Security scheme that ensures you have access to the Spanish healthcare system and means you’re entitled to receive a pension in the future, if you contribute for more than 15 years. All the years spent working as a freelancer in countries within the EU may add up to your contribution period. Conversely, all years spent as a freelancer in non-EU countries are governed by bilateral agreements.
As a result, a freelancer must pay Social Security contributions, which as of 2021 is €286.15 per month. These must be paid regardless of whether any income is earned in that month or not. Indeed, this high cost, and the inflexibility of Social Security payments, are a point of contention when it comes to being autónomo in Spain.
However, there are discounts available for new freelancers. These discounts apply as follows:
- Months 1 - 12: You only pay €60 per month.
- Months 13 - 18: You get a 50% discount per month.
- Months 19 - 24: You get a 30% discount per month.
After two years of being self-employed, you pay the standard rate. However, women under 35 and men under 30 are entitled to an additional year with a 30% monthly discount.
Once you are officially up and running as autónomo, you must take care of the associated paperwork.
When you invoice for any work you have carried out, this should include VAT (IVA) added onto the price, unless you are exempt. For most services in Spain, VAT is 21%. See this article on how to prepare an invoice in Spain. On your invoice, you must then deduct the IRPF from the final amount you’re invoicing for, as the business that you are billing is responsible for paying this.
When handling your business expenses, you should understand how receipts and invoices are treated in Spain.
Freelancers are required to file tax returns every three months for IRPF using Modelo 130, and VAT using Modelo 303. This must be done by the 20th of the month that follows the end of the respective quarter.
It is necessary to pay 20% IRPF of profits in advance when you file a tax return. This is the income less all associated costs of doing business, such as materials, accounting fees, and social security contributions.
New freelancers only pay 7% advance IRPF for the first three years of doing business.
You will also be required to submit an annual tax declaration each year by the end of June for the previous financial year (January 1st to December 31st).
When you file your annual tax return, you may receive a refund or be required to pay additional tax. This depends on whether you overpaid or underpaid throughout the year.
On a Final Note
One thing to remember is that, if you do decide to go freelance, but you don’t have income all year round, you can easily de-register as autónomo until you are earning again.
Our team of accountants at Strong Abogados will be happy to register you as self-employed and to handle your accounting and tax filing. Just ask for our proposal.