SHORT AND SWEET - TWO THINGS TO REMEMBER WHEN GOING SELF-EMPLOYED IN SPAIN
A: Don’t forget to pay your Social Security
A – SOCIAL SECURITY
B – TAX
- INCOME TAX
At a later stage, between May and June each year you need to submit the annual summary (“renta”), where you may be entitled to a deduction on certain personal expenditure such as mortgage, rent, dependants, etc.
At this point the real income tax rate for the full year is calculated, and will result either in having to pay more to the tax agency if you’ve paid too little, or getting money-back, if you’ve paid too much.
It’s worth taking note that some activities, for example, bars and retail outlets, are eligible to pay a Fixed Income Tax Contribution; “estimación objetiva”, known colloquially as “módulos”. Regardless of income and expenditure you pay a fixed amount, which depends on factors such as the size of the premises, electricity contracted, number of employees, etc.
Many people erroneously believe that under this system there is no need to keep accurate accounts. But this is not true, the annual VAT summaries need to reflect always the true income and expenditure, both to keep within the Law, and to ensure successful business management.
Daniel Herranz - Lawyer
Lex Consilium is an English-Speaking Legal and Tax-advising firm, helping new business starters setting-up, and on-going businesses keep one step ahead of their accounts
Please note that the social security and tax principles established in this article are correct to date (June 2010), but may vary in the future; more complex businesses and import-export activities may differ in their tax liabilities.