When choosing between registering as self-employed or setting up a company (S.L.), costs and timeframes are often important factors in addition to the legal and tax considerations. This article provides an overview of the costs involved and the time required for the respective procedures.

A) Autónomo – Self-Employment or Sole Trader

German citizens, like all other EU citizens, are subject to the same conditions as Spanish citizens and must therefore complete the same formalities. The specific formalities and the authorities with which they must be completed depend, for example, on whether you will have your own business premises or intend to employ staff. In any case, the following three basic steps must be completed:

1. Spanish Tax Agency – Registration for the Tax on Economic Activities

The first step is to register for the Tax on Economic Activities (Impuesto sobre Actividades Económicas – IAE) with the Spanish Tax Agency. At present, this registration is essentially a formality, as individuals are exempt from this tax under the applicable general tax rules.

2. Spanish Tax Agency – Census Registration (declaración censal)

When registering for the IAE, you will receive a certificate which, together with the corresponding form and a copy of your identity document, is required for the next step. It should be noted that this registration must be completed no later than 10 days before commencing the activity. Registration is carried out using Modelo 036 or Modelo 037, or through the electronic procedure known as the “DUE” (Documento Único Electrónico).

3. Social Security – Registration with the Spanish Social Security System

Once you have received confirmation from the Spanish Tax Agency of both your IAE registration and your census registration, you must register with the Social Security system using these certificates and the corresponding form. It should be noted that registration must take place no later than 30 days after the census registration with the Spanish Tax Agency. The relevant forms can be found on the Social Security website. You should also check whether you may be entitled to the “Tarifa Plana” (€80 monthly contribution during the first year).

Once these steps have been completed, you can commence your self-employed activity. However, additional administrative procedures may be required in certain cases, for example:

• Obtaining an EU VAT identification number (NIF-IVA).
• Business premises and employees.
• Registration with the Commercial Registry.
• Sale or processing of food products, etc.

Advice and Registration Procedure

Although registration can be completed personally if you have the necessary language skills, it is advisable to seek professional advice beforehand regarding the tax consequences and possible reductions in Social Security contributions. Many firms offer both registration and the filing of quarterly tax returns for a fixed fee, while some specialise specifically in advising and assisting self-employed persons and business owners. PAEs (Puntos de Atención al Emprendedor) specifically authorised by the Spanish Ministry responsible for economic affairs can be found on the PAE website.

Processing Times, Appointments and Costs:

Registration in person:

Depending on the location, appointments may be available within 1–6 weeks. Completing the forms and attending the relevant appointments may take between 4 and 8 hours. There are no fees.

Registration through a PAE:

Registration is carried out 100% digitally and can be completed within 1–2 days. The self-employed person will generally need to spend approximately 30 minutes on the procedure. Professional fees charged by firms typically range from €200 to €400.

Bookkeeping and tax returns:

Depending on the firm’s focus and specialisation, fees for monthly bookkeeping, tax returns and representation before the Spanish Tax Agency generally range from €60 to €100 per month. Quarterly tax returns, year-end accounts and the personal income tax return should be included.

B) Companies (S.L.)

Although it is possible to set up a company personally if you have the necessary language skills, due to the applicable timeframes and the complexity of the procedure, it is advisable to establish the company through a firm authorised as a PAE. In any case, the shareholders must appear before a notary once to execute the deed of incorporation, although a notarised power of attorney may also be granted from abroad for this purpose. The following provides a brief overview of the steps and timeframes for both the traditional incorporation procedure (a) and the digital incorporation procedure (b) through a PAE. It is assumed that all shareholders already have a Spanish NIE number and that no employees will be hired immediately (if an NIE has not yet been obtained, the time required to apply for the NIE must be added):

a) Traditional Incorporation Procedure:

• Application to reserve the company name with the Commercial Registry = 2 days.
• Appointment to apply for the provisional tax identification number with the Spanish Tax Agency = 1–3 weeks.
• Execution of the deed of incorporation before a notary = 1–5 days.
• Filing of the corresponding tax declaration (Modelo 600) = 1–10 days.
• Filing of the deed and Modelo 600 with the Commercial Registry and registration of the company = 1–3 months.
• Appointment to apply for the definitive tax identification number with the Spanish Tax Agency = 1–3 weeks.
• Application for an electronic signature or digital certificate = 1–6 days.
• Registration of the business activity with the Spanish Tax Agency = 1–6 days.
  
  

b) Digital Incorporation Procedure through a PAE:

• Application to reserve the company name with the Commercial Registry and completion of all further steps up to execution of the deed = 2 days.
• Execution of the deed before a notary. The total time required from the founders is approximately 1 hour for the notarial appointment = 1–2 days.
• Modelo 600, application for the tax identification number, registration with the Commercial Registry, registration of the business activity and commencement of operations = 1–2 days.

Processing Times, Appointments and Costs:

Incorporation in person:

Depending on the location, appointments may be available within 1–6 weeks. The entire procedure, including appointments with the notary and the relevant authorities, may take between 2 and 4 months until registration with the Commercial Registry is completed. Notary and Commercial Registry fees amount to approximately €600.

Incorporation through a PAE:

With the exception of executing the deed before a notary, the incorporation procedure is carried out 100% digitally and can be completed within 2–4 days. Professional fees charged by firms typically range from €1,800 to €3,400.

Bookkeeping and tax returns:

For small companies (with annual turnover below €1 million and fewer than 10 employees), fees for bookkeeping, annual accounts, preparation of financial statements, tax returns and representation before the Spanish Tax Agency may range from €1,800 to €4,200 per year, depending on the firm’s focus and specialisation. Quarterly tax returns, annual summaries, annual accounts and the corporate income tax return should be included.

Your PAE: Law – Spain
As a PAE (Punto de Atención al Emprendedor) authorised by the Spanish Ministry responsible for economic affairs, our firm has direct access to the relevant public authorities, the Spanish Tax Agency and the Social Security authorities. This enables us to complete the most important administrative procedures electronically, accelerate the registration process and avoid the need for you to attend the authorities in person.

As part of the same procedure, we can also apply electronically for certain licences, reserve domains, register patents, register databases with the Spanish Data Protection Agency, etc. Further information.

Conclusion

With regard to costs and timeframes, it can therefore be concluded that there are significant differences between registering as self-employed and setting up an S.L. mainly when using the traditional procedure (Autónomo: up to 6 weeks; company: up to 4 months). In addition to the share capital, setting up a company involves direct costs for the notary and registration with the Commercial Registry. When registration or incorporation is carried out digitally through a PAE, the timeframes are similar, although the shareholders must still appear before a notary, either in Spain or through a power of attorney.

Use our legal form self-assessment tool to obtain an initial recommendation when choosing between self-employment and setting up a company.

In our blog Autónomo or Company you will find further articles on liability, timeframes, costs, shareholders’ residence and other relevant aspects.

Author:

Christoph Sander
Lawyer and Tax Advisor
CEO, Partner, Director
info@sspartners.es
Tel: (+34) 951 12 13 06
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