Autónomo is using the means of independent contractor as a Spanish term and there are some requirements to the registration process for them. If you are doing remote work or already a freelancer in Spain or even a person who wants to start a new business in Spain, you should keep reading and dealing with how to become an independent contractor. In this content, there are two ways to set up a business which are Autónomo Profesional and Autónomo Empresarial. Two of them will be explained below and their approval processes.
Here is the basic explanation for autónomos in Spain
- Autónomo Profesional: freelancer
- Autónomo Empresarial: sole trading or commercial business trading
- Sociedad Limitada: limited company with separate personal and business assets
This article will explain what autónomo means; the requirements for being an independent contractor; paperwork issues and their tax liabilities.
Table of Contents
What is Autónomo?
An autónomo means freelancer or self-employed in Spain. There are some regulations and approval processes for it. If a person wants to become an independent contractor, s/he needs to do a registration.
Firstly, to work in Spain as an employee, the person should complete the work permission process. However, becoming an independent contractor makes everything easier for that person because they do not need to sign a contract like an employee.
Furthermore, if you want to become a self-employed person, there are some requirements for that. The initial eligibility requirement is about your country of origin. If a person is an EU/EEA/Switzerland citizen, it is easy to work as an independent contractor or to set up a company. Nonetheless, being from a non-European country makes most things complicated.
First of all, if you are a non-European citizen, you need a visa to get permission to enter Spanish territory. The next step is to have a residence permit to stay permanently in Spain and additionally, a work permission is required to become an independent contractor. After this whole process, there are also requirements that entail possessing a NIE number and a Spanish bank account.
How to Register As An Independent Contractor in Spain?
Before setting up a business, the crucial thing of the registration part is you have to register to Spanish tax authority. Also, when you start your business, you need to notify the tax office about your first day or you will pay a fine. All of these steps are crucial for non-EU/EEA/ Switzerland citizens. If you are a citizen of one of them, you just need to get a NIE.
There are some steps to complete Spanish tax authority registration and you will need the following:
- Tax ID number (NIE)
- TIE for third country nationals
- The names of your father and mother
- Personal Spanish bank account IBAN number
- Spanish mobile phone number (a friend’s local number can also be used)
- Registration to paying the tax for economic activities
First and foremost, the self-employed work visa has to be done. Within one month of arrival in Spain, you have to apply for a residence permit, after that a foreign national identity card and then lastly the registration part should be completed as ‘self-employed’ in the Social Security System.
You can apply for a NIE at the Spanish embassy in your country or in Spain at the Spanish National Police Station. The application will be completed with a NIE EX 15 form, your passport and two ID photos.
Tax issues are required for just sole traders and independent contractors. You will identify yourself, the inscription in the tax office which is also called the Hacienda, and according to this identification of work, you will declare form 036 or 037 and you will receive your personal tax certificate.
After the tax registration, you will follow up with another step which is social security and healthcare. There is a 30-day limitation period to inform the Spanish social security office about you becoming an independent contractor. The time period will begin after registration at the tax authorities. This step is compulsory for all autónomos. If you are one of them you have to register with the Spanish social security system under the Special Regime for Autonomous Workers.
Moreover, there is also an application form for a foreigner’s identification number (NIE) and certificates. You should complete that form, but the Spanish version must be completed, not the English or any other language version. The application will be held at the foreigners’ department of a national Spanish police station. You will have to show your passport and pay a fee.
Because the regulations are quite changeable, you should always check the requirements with your local immigration office or consulate, before gathering the documents so as not to waste your time.
Besides, having arrived in Spain and worked for 5 years, a worker will get permanent residency. After 10 years of residency as a legal, either temporary or permanent, that person will obtain Spanish citizenship. There are some exceptions though, like committing to renounce your previous nationality, having financial stability, having no criminal record and so on. Keep in mind, if your nationality is one of the following, you may be eligible for citizenship after 2 years of residency as a legal only. These nationalities include persons from Philippines, Andorra, Spanish-American countries, Equatorial Guinea, Portugal, also individuals with Jewish Sephardic origin.
Tax Obligations For An Independent Contractor
There are two kinds of taxes which are IVA (which is VAT) and IRPF (which is income tax). You will need to file every three months’ tax returns: i.e. January, April, July and October.
After you declare your business income and deductions, you will pay income tax. If your income is higher than 20%, you need to reimburse the difference. However, if the rate is lower, you will receive a refund.
If your customers are from EU/EEA/Switzerland, you will be required to pay VAT on goods and services. If they are not, you will not be charged standard VAT. It means that the prices of goods and services will be added to VAT on your invoice.
Once everything has been taken into account and you have completed all the legal formalities, you can proceed with creating your own business. Although you may be managing these processes, it can be complicated and if you don’t want to deal with all these procedures, there is an alternative route. As an independent contractor, you may want to focus on the business and spending your time with it. You can hire or get help from an accountant who can assist you. The only thing that you will need to do is send your own invoices and that person will resolve all the paper and legal work for you.
What Is The Income Tax? (IRPF)
The income tax is called Impuesto sobre la Renta de las Personas Físicas (IRPF) in Spanish. It is a direct tax levied on the income of individuals.
This tax liability is determined by the individual’s residency or non-residency status in Spain.
The tax rate is 24% of a 2% of the catastral value for non-EU citizens and 19% of a 2% of the catastral value for EU citizens.
These taxes must be submitted between 1st of January and the 31st December with regards to the previous tax year. These non-residents who reside in Spain for more than 183 days, are considered as residents for tax purposes, even though they don’t have their residence permit.
If you are a Spanish resident, you will be taxed for your worldwide income. You need to file your income tax return from May until the end of June.
These income tax returns are submitted by the tax office or online via the internet. The income return will need to be filed if you:
- Have changed your job during the same year and your last salary was more than 1500€ in the previous month
- Earn more than 22.000€ per year
- Are a tax paying resident in the country
If you generate an income somehow, either self-employed or with your job as an employee, you will pay taxes based upon that income. That is because it is called salary tax.
In addition to that, your salary tax payment can be reduced according to your job and personal situation, etc.
It is mentioned that if you stay in Spain for more than 183 days in a year, you will be regarded as a tax resident.
The person who is a resident in Spain, will pay income tax on the income they get worldwide. For instance, if they sell e-commerce products, they will be taxed in Spain as a seller and also in those countries abroad. Likewise, there are many countries that have double-treatment conventions with Spain, and thanks to those conventions individuals do not need to pay twice for the same income.
As well as the income tax that is paid by a resident, there are two types which are general income tax and savings income tax.
With regards to savings income:
- If your income reaches up to 6.000€, your tax rate will be 19%
- If your income falls between 6.000€ and 50.000€, your tax rate will be 21%
- If your income falls above 50.000€, your tax rate will be 23%
For the general income, there are no clear cut tax rate numbers because tax percentages vary across regions, whereas the following territories have these fixed tax rates:
- In Cataluna, if your income reaches up to 12.450€, your tax rate will be 21.5% and if your income is above 175.000€ your tax rate will be 48%
- In Madrid, if your income reaches up to 12.450€, your tax rate will be 19.5% and if your income is above 120.000€ your tax rate will be 48%
- In Valencia if your income reaches up to 12.450€, your tax rate will be 19% and if your income is above 60.000€ your tax rate will be 43.5%
Personal Income For an Independent Contractor
The independent contractor’s income tax system differs from workers. It is not withheld from payroll, but from invoices that you send your suppliers, if you choose one.
As a general rule independent contractors have to apply 15% income tax but there are some differences with regards to some circumstances.
- If you are a self-employed person for the first time, you will pay 7% throughout the first registration period and for the following two years
- If you are registered as an independent contractor in a module the deduction will be 1%
- For agricultural, forestry activities or livestock, the personal income tax deduction will be 2%
- And the last thing is that there is no deduction if your client is an individual
Income Tax For Non-Residents
If you stay for less than 6 months in Spain, you do not have to pay income tax. As a non-resident person, you are responsible for money you earn in Spain, not for the worldwide income. However, non-resident people from EU countries, Iceland or Norway will pay a flat rate of 19%. If you are from any other country except the above mentioned, a 24% fixed rate will be applied to you in Spain.
To conclude: there are three types of independent contractors in Spain which can be that of a freelancer, sole trader or a limited company. Autónomo is used for general freelancer means and not for the technical one. An independent contractor needs to get at least some of the crucial things i.e. a NIE number, work permit, passport, registered tax authority and Spanish social security. The independent contractor can get all of this done by him/herself but can also authorize an accountant who deals with these processes.
*This document should not be assumed as legal advice. The above information may always change so please first make contact with our team of attorneys to confirm.