The employment situation in Spain ranks among the worst in the EU. As well as high unemployment, wages are notoriously low while hours can be extremely long. And your contract may only be temporary. An obvious solution is to go the self-employed route or autómono route. Not only will you be your own boss doing what you want to do, you’ll be able to decide how and when you want to do it. This sounds like the perfect scenario and not for nothing are small and medium enterprises the backbone of the Spanish economy.
But while being self-employed is a great option especially in today’s internet-driven world, there are some pitfalls and obstacles on the way. In addition, Spain isn’t particularly self-employed friendly. However, with careful planning there’s no reason why you can’t make a success of being self-employed in Spain.
1. Know your niche
Before you become officially self-employed in Spain, take a look at what you’re going to offer. To make a success of going it alone, you need to offer a unique service or product, or do something better than your competitors. Define your unique selling points (USPs). These will help you in two ways: firstly, to market your service or product and by extension, get clients; and secondly, help you define your market niche so you know who to target (see below).
2. Do your market research first
To make a success of your self-employment, you need to sell your service or product. But first, you need to find your clients. On most of the Spanish Costas and islands, your clients will be expats and/or Spanish. Don’t underestimate the Spanish market – it’s almost always bigger than you think. For example, on the Costa del Sol 87 per cent of the registered population is Spanish. Importantly for businesses, the Spanish population is much more stable than the expat – foreigners tend to come and go while the Spanish will stay for several years.
Even if your Spanish language skills (see 3 below) aren’t fluent, you can still provide the Spaniards with your services or products. For example, as a copywriter, I can give Spanish businesses help with their marketing materials in English.
3. Learn Spanish
In many parts of Spain popular with expats, it’s often all too easy to get by with nothing more than a few words in Spanish. After all, everyone speaks some English and you can always resort to sign language. But if you’re hoping to make a serious go of being self-employed in Spain you need to make the effort to learn Spanish to a reasonable level. Knowing the language will help you: a) register as self-employed and understand your situation, rights and obligations. b) save you money because you won’t have to employ someone to translate everything into your language for you. c) tap into the Spanish market (remember, never underestimate the opportunities available there). d) take advantage of the support available for businesses (see 5 below).
4. Go legal
Once you’ve made the decision to go self-employed, you need to do it legally. Don’t be tempted by payments in cash, by PayPal etc. You might be able to stay under the taxman’s radar for a bit (and only then if you manage to keep your earnings low), but sooner or later you will have to register.
Register as Self-Employed in Spain
In Spain, you must register with the tax office (AEAT) and social security (seguridad social). Signing up with both is straight forward and if you book your appointments online in advance, quick. When you sign up with social security, ask about discounts on monthly payments for new self-employed and/or women – the government offers reductions if you meet certain conditions.
Self-Employment Taxes in Spain
Once you sign up your financial obligations start as follows: 1. Social security monthly payments (taken from your bank account on the last working day of the month). These are charged at a flat rate regardless of your earnings and you should expect to pay around €300 a month unless you qualify for a discount under a government scheme. 2. Tax returns. Most self-employed people have to do quarterly returns. These are usually simple maths – earnings minus expenses to give your income. You then apply a tax rate (e.g. 20 per cent) to this. Again, this is a flat rate regardless of your earnings.
Note: when you invoice Spanish-registered businesses they must deduct and pay your tax on your behalf. The rate is currently 15 per cent. These earnings and deductions must be included in your tax return. You probably have to file quarterly VAT returns and everyone is required to file an annual return. The good news here is that many self-employed professionals are entitled to rebates.
5. Take professional advice
In the beginning, take professional advice from a Spanish accountant about tax rates, invoicing, expenses and filing tax returns. Bear in mind that not all expenses are valid especially if you work from home. Check the tax office allows an expense before you deduct it from your earnings.
Once you’ve been self-employed for a while and have a good understanding of Spanish, you’ll be able to do your tax returns yourself and save paying an accountant.
6. Make the most of local business resources
The Spanish government and regional authorities are keen to bring unemployment down and help new businesses. This means there’s a lot of assistance (advice, subsidies, grants, etc.) out there, particularly for women.
Make the absolute most of this and tap into as much as possible. A good place to start is your local regional business centre (these are called CADE in Andalusia). Arrange an appointment and make yourself and your service or product known to them. Get on their mailing lists, sign up for courses (also good networking opportunities) and find out about grants, interest-free loans etc.
7. Market your Freelance business in Spain
Get out into your local business community to make yourself known – one of the hardest aspects of being self-employed. This is particularly true in Spain where word of mouth is probably the best marketing tool. One of the best ways to do this is by networking and the good news is that many networking events are free. Here you can get together with like-minded people and network in any language to create synergy and future business opportunities. And again, don’t forget Spanish networking events.
8. Be aware of the drawbacks
Being self-employed in Spain is far from easy. And it’s best to be aware of the drawbacks so that you can keep your expectations real.
Financial obligations: While you might be your own boss doing what you love, you have tax and social security obligations every month. And you have to budget for and fulfil these however much or little you earn.
Uncertainty: Self-employment is a permanent roller coaster. Some months you may rake it in while others you barely scrape by. Some months you might be working flat out seven days a week and in others, you may well be twiddling your thumbs. Clients can be loyal and supply you with a regular amount of work or drop you from one day to the next.
Save funds in your lucrative months to see you through the lean ones. Take some time out when you haven’t got much work and allocate some spare time for networking and marketing your services or product.
Small safety net: It’s also difficult to get the benefits that employees take for granted – holiday or sick pay, maternity leave, unemployment benefit… Recent changes in legislation mean it is now possible to get some of these benefits if the majority of your income comes from one source (ie one company), but if you qualify your social security payments go up.
9. Open a separate business bank account
As soon as you register as self-employed open a separate business bank account. Use it for all your income and expenses, and set up your direct debit for social security and tax payments from this account.
When you receive payment from a client, work out how much tax you’ll be liable for plus your social security payment. Keep this amount in your business account and transfer the rest to your everyday bank account. That way you’ll always have enough in your account to pay your social security and tax.
10. Have a designated work space
The last tip is for your sanity! One of the hardest things about being self-employed is separating work from the rest of your life. This is particularly difficult if you don’t have a designated work space – not only can you not get away from your work, you’re always being reminded of it.
The ideal scenario is to rent a spot in a co-working space (some regional authorities provide these free – e.g. Andalucia Lab in Marbella and CADE Málaga). This gives your working day a structure and gives you the chance to meet other people (working at home can be lonely).
If you can’t afford a co-working space or there isn’t one near you and you have to work from home, put your work station in a spare room so you can shut the door on your tasks at the end of the day. If this isn’t possible, put your work station away (and out of sight) at the end of each day. Never have a permanent work station in your living room or bedroom because then you simply cannot get away, ever.
Joanna Styles is from London and has lived Costa del Sol since 1989. She is a freelance writer and journalist who has lived since and the author of The 5 Best of Everything in Malaga, a handy guide to Malaga city. Find out more on www.joannastyles.com and www.guidetomalaga.com.
This article was first published in Spain and Me – Stories from women who have made Spain home. An ebook put out by Costa Women.