As well as “how much business will I get?”, the big “unknown” for anyone going self-employed in Spain is: “how much it will cost to go freelance?”. Here’s a diagram to help you work it out.
Freelance in Spain – costs and taxes
How this works:
- VAT: (aka “IVA” – stands for Impuesto sobre el Valor Añadido) Various rules for different industries. You play tax collecter for the government and add 21% max on to what you earn, which you are responsible for declaring. Not applicable for non-EU based clients.
- See this article for info on paying VAT when trading digital services in Europe.
- IRPF: The IRPF (Spanish income tax) is complex – more info for anyone self-employed in Spain here.
- Social security: Depends on how long you’ve been self-employed. Goes up to just below €300.
Time for a quick ad break. Keep reading for the example below!
An example: Pepe is a freelancer setting up business in Spain. He works for Spanish companies, and his total income with all taxes included is €2242 per month. He’s in the first six months of business.
- 2242€ is the price including VAT – 121% of the total. The base amount (before VAT) is:
- 2242/121 * 100 = €2000 (+€242 VAT to hand in to the Hacienda)
- Then take off 7% IRPF:
- 2000/100 * 93 = €1860 (+€140 handed in by companies he works for)
- Then take off €50 social security…
… Pepe is left with €1810. 80% of what he started with.
In the second year, social security rises to 267€ (unless Pepe is a woman under 35 or a man under 30). His IRPF will have gone up to 15%, leaving him with around 60-50% of his original earnings.The cost of starting a company in Spain has risen to 40-50% of Pepe’s earnings.
Too much? Many think so. Let me know your opinion below.
This just covers the most common freelance/business models. Some industries – such as agriculture and fishing – are charged different rates.
I hope this has helped you to evaluate the cost of going freelance in Spain. If you’re thinking about setting up business, you might also like to take a look at my guide to signing up as self employed.
Text and photos by Penelope