Spain is one of the most desirable business destinations due to its significant role in the European Union (EU) and proximity to other strong economies, viz. UK, Italy, France and Germany. The country came 31st in the World Ease of Doing Business report by the World Bank in 2019. Hence, there has been a rise in major organizations venturing into the high-consumption markets of Spain.
Registering as a self-employed professional is the best option for business owners looking to set up a simple business entity with minimum hassle. However, there are few legalities involved in registering as a sole trader in Spain, as discussed below.
Who Can Be a Sole Proprietor in Spain?
Anyone can choose to be a self-employed individual or a freelancer in Spain. As an autonomo, they can operate their business with full administration and much lower cost.
Spain is one of the most desirable destinations for entrepreneurs. The country has almost 3.2 million sole proprietors, accounting for nearly 16% of the total population.
There are two kinds of sole proprietors in Spain:
Self-employed entrepreneur (empresario individual)
A self-employed entrepreneur is a one-person company. They manage their work and remain liable for all the risks and debts. This structure is the most suitable for businesses with small starting capital that cannot hire many employees.
Freelance professional (profesional autónomo)
A freelancer professional is an individual who routinely performs work in return for compensation but is not under an exclusive contract with an employer. Although they have the same obligations as a self-employed entrepreneur, they do not necessarily run their business as a one-person operation, such as when the work is inconsistent and their earnings fall below the legal minimum wage.
The Spanish law dictates you to register as a sole trader, even if your earnings are sporadic and from various sources. A restaurant owner, IT professional, engineering consultant, or any other professional running their small business and invoicing clients for their services classify as autonomo and must register with themselves.
Benefits of Sole Proprietorship in Spain
Becoming a sole trader in Spain is the easiest way to conduct business for individuals. Entrepreneurs who want to learn about a new market under a tight budget can also register as sole traders.
The following benefits make sole trader structures in Spain reliable and convenient:
Quick registration process
Establishing a sole proprietorship in Spain follows a straightforward process. You need little paperwork and minimum fees to become a registered sole trader. Therefore, it is the best option for small businesses and budding entrepreneurs.
Complete control as the owner
Sole traders do not have to deal with the inputs of the shareholders and seek approval elsewhere. They have total control over the business and remain responsible for the actions.
Few government regulations
Sole traders have to follow minimum government regulations. Unlike large-scale corporations, they do not have to spend considerable time and resources on reporting and compliance measures.
Sole traders must submit their tax returns as the business entity is not liable to pay the tax. It is the sole proprietor’s responsibility to file the profits earned via the entity. Therefore, you do not have to handle any complicated structure or forms of taxes.
Documents Required for Registering your Business in Spain
Sole trading businesses require only a handful of documents, as given below:
- NIE number (Identification number for foreigners)
- Proof of identification
- Spanish bank account details
- Work permit (if not EU resident)
How to Register As A Sole Proprietorship Company in Spain
Register as an autonomo
- Register with the tax office by completing Form 030 and registering within the Census of Liable Taxpayers. This will enter your records in the tax system, Agencia Tributaria or Hacienda.
- Next step is to register with the autónomo social security system RETA (Régimen Especial de Trabajadores Autónomos). Present your national insurance number for Spain (an NIE), bank account details and work permit (if you are a Non-EU national).
- Fill out the form Modelo 036 or 037 and submit it to the Hacienda with your proof of identity and NIE number. The forms ask about your nature of business and if you will be paying IVA (VAT in Spain). You must confirm with an accountant if you have to charge IVA for your services.
Social security contributions
To register with the Spanish social security, you must fill a form confirming your autonomo classification, as different categories correspond to different amounts. Hence, if your operations are considered dangerous, you are liable to contribute more than safer businesses.
Spanish law requires all employees in the country to contribute to the social security system. Sole proprietors in Spain must register with the Special Regime for Self-Employed, also known as RETA. They get access to benefits such as public healthcare, parental leaves and pensions. However, they are not provided unemployment benefits and coverage for work-related sickness or accidents. In such cases, they must get a separate insurance plan.
Spain’s social contribution amount for autonomos is among the highest in the EU. The sole proprietors have two options: pay a minimum of 944 euros or a maximum of 1,233.20 euros salary base.
You can calculate the monthly amount by applying a 32% rate to your preferred salary base. The Spanish authorities have the right to deduct this amount monthly from your bank account if you have registered as an autonomo.
If you are operating from a location open to the public, you must seek a license called ‘licencia de apertura’ from a local town hall in Spain. The authority conducts an inspection, asks for a few documents and requires a fee before granting you the license.
If you start an internet-based business from home, the licensing procedure is quick and simple. However, if your business employs people and directly impacts consumers (such as creches), you must get additional certification.
Residential locations are not usually permitted to be used for business purposes. Although, you may conduct some office-based businesses from your residences, such as lawyers and accountants. The Spanish law demands that such offices be on the first floor of the residential building and not higher.
How Multiplier Can Help You?
While opening a sole proprietorship is easy in Spain, managing taxes and complying with local and global laws is a big challenge. Spanish laws are strict on sole traders and demand full compliance with the complex regulations. You may need to seek legal and financial advice to overcome these obstacles.
Multiplier’s PEO solutions help you venture into new markets and align with all relevant laws. Our digital platform helps you pay the right taxes, manage benefits and keep up with the ever-changing laws. Connect with us so we can assist your business achieve more.