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Startup & Entrepreneurship

How to be tax smart as a Freelancer (or Autónomo) in Spain

Gabriela Nascimento

21 June 2022

We know that many of our members are interested in learning more on how to be tax efficient in Spain. So if you’re between registering as an Autónomo or Freelancer and incorporating a company, this blog post is for you as our partners and experts from Lexidy are going to compare the Registration Process and Potential Taxes of both.

The process to create a company can be quite long and expensive. You need to prepare documents, meet a Notary and wait for the company to be registered. The Autónomo process is much simpler. You just need to register with Social Security with your NIE.

The taxes also differ:

  • Freelancers pay income tax
  • Freelancers must pay social security
  • Companies pay 15% to 25% corporation tax

A self-employed person must pay personal income tax. This is taxed progressively and can be as high as 47%. Freelancers also make monthly payments towards social security.

Companies, however, pay a flat rate of 25% in corporate income tax. What’s more, is that the rate can fall to 15% for start ups in the first two years.

What else do you need to know?

  • €3,000 in startup capital
  • Financial protection
  • Financing options
  • Professionalism
  • Spanish residency

Well, limited companies require €3,000 in share capital. By contrast, self-employed people can avoid this. Companies have limited liability for any financial issues. So in other words, their debts are linked to the company and not your personal assets. Freelancers, however, can risk their savings and personal assets in the event of repaying debts.

In theory, limited companies have easier access to financing and bank loans as their accounting is more transparent than freelancers. Companies also convey a more professional image which is important as your business scales.

Finally, both company directors and freelancers must have a valid work permit to carry out their work in Spain.

But what about the big question - which is best?

  • Freelance or company?
  • Freelancing for up to €60,000
  • Progressive IRPF
  • 25% Corporation Tax

It depends on your company. Generally being an Autónomo or freelancer is beneficial for those earning €40,000 to €60,000. This is because of taxes, or the IRPF. Taxes are progressive in Spain, and slowly rise up to 25% for incomes up to €60,000. 

Companies pay the same in corporation tax but it’s a flat 25% rate. So it never rises or falls. Therefore at around €60,000 a year, it makes sense to create a limited company. 

However, if you’re planning to incorporate, it’s important that your business has enough volume to sustain itself. If you have doubts, freelancing gives you a lot more freedom.

Was this post helpful? It’s quite a lot to break down, but our partners from Lexidy are here to help you. Want to get started and be tax-smart? Message Lexidy experts :)


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