The cost of going freelance in Spain

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

Cost of taxes for freelance workers in Spain

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:
  • 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 275€ (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. A friend who works as a therapist in Barcelona is also exempt from IVA.

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

Posted in Tax

38 Replies to “The cost of going freelance in Spain”

  1. Hi Penelope thanks for the useful information but a mistake here to clear up, I’m currently freelance and the 9% is applicable for your first 3 calendar years as self-employed. So if you started as self-employed at any point in 2014 you will be entitled to the discount until the end of 2016. Secondly, there is a calculation error above just incase anybody happens to be using the actual sums shown to try and work out their own deductions.

    1. Thanks for contributing! I’ve modified the article to take what you’ve said into account (I hope you don’t mind, I used your example :)).

  2. hmm that looks a bit complicated and it looks like its a lot specially social security… I thought the amount was per year not per month … I am planning to open my company but this is loads of money to pay to Hacienda.

  3. Hi
    I’m a self-employed English teacher and know how hard it is to pay into the system every month!
    Working in the education sector there is no VAT to charge to clients which is a big help!
    My next minefield is finding out about reaching Spanish retirement age and receiving my pension BUT continuing to teach.
    It is possible to do this but I’d like to find out if it’s worth the hassle.
    I understand that my social security would decrease quite substantially but I’d like to find this out for myself before seeing my gestor.
    If I do succeed in getting this information I will let you know so that you can add it to this page.

    1. Thanks for your comments Sheila – best of luck navigating the system! And yes, do let us know what you find – I’m sure you’re not the only one in this position.

  4. I have recently started my own company in Barcelona with another person. At the beginning of March 2015 we both registered as autonomo for the first time.

    As a director of a company and over the age of 30, am I entitled to the ‘discounted’ social security payments?

    1. Hello Sean,

      The Spanish Government recently brought in a law which entitles new autónomos as well as those under 30 to Social Security discounts, and according to the Hacienda’s website it looks like this should apply to you (see section B under “Beneficios en la Cotización”). That said, do check with your local Social Security office if you have any doubts as these things can sometimes vary according to circumstance. Hope this helps!

      Response updated 04/15.

      1. Hi Penelope,

        Thank you for your response.

        We have called the Social Security offices and they confirm that as a director of a company in Spain, we are not entitled to the ‘discounted’ social security payments.

        The law does not state anything about directors, but the Social Security issued an intern regulation containing such exclusion of directors.

        Go figure!

        Regards,
        Sean

        1. Hello Sean,

          Unbelievable! That must have been incredibly frustrating to hear. Not only does this not make any sense, it’s incredible that it’s left to the taxpayer to guess what their obligations are.

          Thanks for taking the time to comment – this will alert other readers to this situation.

          Best of luck, fingers crossed for change in the next elections.

          Penelope

  5. Hi Penelope,
    This is fascinating stuff since I intend to relocate to Spain next year. Having been profitably self employed in the UK for 30 years or so it seems that it will only be profitable there for the first 3 years of ‘sliding scale’ discounts. Thereafter I might as well not bother if I’m to hand over that much of my trading income to the state in taxes. Please, Señor España, where’s the incentive?
    It doesn’t put me off the move though since other income makes it worth while.
    Regards,
    Jon

  6. Hi

    in your last chart you claimed that the business owner pays 21% VAT when dealing with customers. That is not correct. As far as I know the VAT is treated like a sales tax where ultimately the consumer is taxed 21% not the business owner.

    Correct me if I’m wrong though.

    1. Thanks. In theory, you’re completely correct – VAT is a charge on the final consumer rather than the provider. In practice, though, the cost is often passed on to the provider when they’re competing against providers who don’t pay VAT.

  7. I am looking to set up self employed and to earn 2000€ (Net) per month working a 32hour week.
    How do I work out my hourly rate to the customer to receive this income.

    Thanks in advance

    1. Hey Ryan. Tax rates differ per industry in Spain, but to give a rough idea you’ll need to pay 21% VAT, 20% IRPF (given you have customers rather than clients), and social security payments as per the sliding scale above. For the first 6 months of business that means you’ll need to charge 2550€ / month + VAT. 50€ of this goes on Social Security, 500€ go on IRPF. So your total bill will be 3085,50€ inc. VAT. Dividing by 128 hours in a month makes just under 25€/hour, with no margin for holidays, sick days, etc. If you have business costs, you’ll also need to incorporate these. Hope this helps!

  8. Planning to move to Spain next year. I am a freelance dance teacher and performer and occasional private English teacher. My income is so little that it is often barely even pocket money. Is there a minimum amount you need to pay, regardless of how much you earn?

  9. Hi Penelope,

    Thanks so much for the information. I’m new to Spain and have set up as Autonomo Graphic Designer. Most if not all of my clients are outside of Spain and outside of Europe, mainly in USA. How do I write invoices for an individual who wants a custom illustration who is not a person and who doesn’t have a tax code? (I know they have Social Security, but it’s not exactly a number they want lying around on a piece of paper somewhere), or a company in Canada that isn’t VAT registered etc.. Any help would be greatly appreciated, my gestor doesn’t really know what to suggest.

    1. Hello Josh,

      Hmm, tricky one. When I was working for a US client I used their Federal Tax Identification Number. Also, I think the idea is just to have some sort of citizen’s identification number, so perhaps your client would be more comfortable providing their passport number? Realistically this (or even a driver’s licence number) is what the DNI/NIE is equivalent to in countries that do not commonly use identification cards. Best of luck with your graphic design business and let us know if you manage to get any further clarification.

    2. Hi Josh, have you found an answer to the question of selling services to the States whilst registered in Spain? I’m a Brit living in Cáceres and want to work out how to sell my work (animation) to new clients in USA.

      Gracias, Leo

  10. Hi! I’m think about moving to Spain. I’m a freelancer but get most of my income from one specific company in the US. Also, I’m under 30.
    Let’s say I earn $2000 from this company in one month, does that mean that I’ll only have to take off 50 euro and also deduce 20% for the IRPF, meaning that I keep $1550?

    1. Hey Joan,

      Yes – I believe so. Bear in mind that IRPF is paid on your profits not total income, meaning that you would pay €1950 * 20% = €390 IRPF, making total earnings €1560. There is also some interesting info in Spanish about TRADE (freelancers who work prodominantly for one company) here you might like to read, but as far as I can see this only applies to people working for Spanish companies. As I mention elsewhere, I’m not a professional gestor, so you should take all this as opinion rather than fact and make sure you check it elsewhere.

  11. I am over 70 but still in demand as a specialist, there is not a lot of work and at 10€ an hour hardly worth the effort but needs be and the rent has to be paid so a day or two now and again , I do not want to be illegal but it seems that if I declare and pay social security it could actually cost me more than I earn some months or at least I could end up working 30 hours and paying it all to the government. The cost of being caught working ‘black’ is also scary so what do I do?

    1. Hello Peter. I agree that the law is not supportive in this kind of circumstance. There are several cases on record where people earning less than minimum wage did not have charges pressed against them when they did not pay social security, so this seems to be precedent. However, paying the variable taxes on income (IRPF and IVA) does not have this precedent. In some business models it’s enough to just pay this once a year with the Declaración de la Renta (see my section on tax for teachers). Another option you might like to consider is working for a cooperative. Hope this is helpful, always check what you read on the web (even on my blog :)).

  12. hello Penelope,
    Thanks for the informative article 🙂
    I have a complicated question to you. I am a PhD student in Barcelona.
    Currently, I am working as a part-time localization specialist with “convenio de practicas” so I have my social security number.
    When my contract terminates, I would like to settle down as a freelancer in Spain. I am from Turkey which is not member of EU. Do you think I can work as a freelancer officially? Do you know relevant regulations in this respect?
    Thanks in advance.

    1. Hello Gökhan. Glad you liked the article! I’ve met non-EU freelancers in Spain so I’m sure this is possible. According to the Spanish Ministry of Employment and Social Security (last updated Jan 2016), you can obtain a permit to freelance in Spain if you fulfill a series of requirements, such as having any qualifications you need, access to any initial investment required and a sound business plan. You can also take a look at my article on the topic, and perhaps the Turkish embassy or consulate’s office would also be able to advise? Hope your PhD goes well, and let us know how you get on.

  13. How are u Penelope!? Your website helps me a lot so far. I’m still confused about IRPF tax. I’m masseur and most of my clients don’t want to have invoice for that. Big part of them coming to Spain for holiday as well. What can I do then? What if I can write just a few invoices but in the end of the month I’ll wait to show bigger income because I want to have good records for bank or flat rent. Is it different rule for private clients? I couldn’t find much about this tax online. Most of examples look like self employed person cooperate with another self employed

    1. Hey Darren. Sounds like you are dealing with private clients (rather than businesses who can pay in IRPF on your behalf). So you need to pay it in yourself at a rate of 20%. You do this by using the Modelo 130 every trimestre (more info here). For IRPF, you also need to do the declaración de la renta once a year to summarise. If you’d paid in a lot of IRPF during the year and your earnings are low, it’s likely you’ll get some of this back at this point. Hope this helps and glad you liked the website 🙂 Don’t forget to check my advice with other sources.

  14. Hi Penelope,

    This blog is awesome! Am sure this is a huge help to folks trying to work the autonomo tax maze.

    I am trying to explain this to a friend of mine who’s providing services to house owners. He does the odd plumbing/painting/cleaning services, charging them 10-20 euro/hour. Currently, lets say, he is not exactly on the legal end.
    The question is, if he registers as an autonomo, will he have to charge VAT & IRPF to his end customer?
    21% is understandable, but since his customers arent businesses, does he still need to add the 7%?

    Also is there some kind of exemption for folks who are doing the odd job – just now and then?

    Great if you can provide your thoughts!
    Any help is much appreciated!

    Thanks!!

    1. Hey Ryan, glad you like the blog! 🙂

      Sounds like your friend will need to pay 20% IRPF in every quarter using the Modelo 130 (and summarise it in the yearly Declaración de la Renta). I’m not entirely sure whether the kind of services your friend provides need to pay VAT, but if so he will also need to do quarterly VAT returns and again, an annual summary declaraction. There’s a Spanish-language article here he might be interested in – it seems to cite VAT as between 10-21%.

      In terms of exemptions, not exactly, but there’s an article you might be interested in here.

      I am just writing about my own journey/perceptions in this blog, so check all my advice with a professional as I can’t promise not to have missed something. I’m sure there’d be plenty of others interested in hearing how your friend gets on, so do write back and let us know. Best of luck!

  15. Hi Penelope, Thanks a lot for the great material here.

    I would have a question quite similar to Josh, in the difference that I currently work for a company by providing a digital service (drawings for animation/film production) in Ireland that is VAT- exempt (and were clear I can’t charge them the VAT in my invoicing).

    If I’m a self employed in Spain, would I have to pay the VAT even if I cannot charge the company ?

    Thanks a lot for your help, keep up the good work !

    K.

    1. Hey Krimo. Glad you like the blog and find it useful 🙂 This isn’t a sector I’m familiar with, but in general I’ve heard that work that generates author’s rights is also exempt from VAT in Spain. There’s a (Spanish) article here about press photographers that might apply to you. You also might like to try calling the Hacienda on 901 33 55 33 to check. Or perhaps someone from the community has more ideas? Do let us know what you find out, as I’m sure this info will be useful to others too.

      1. Hi Penelope, thanks for your fast reply, unfortunately, I don’t have any author’s rights due to the commercial nature of the job.

        I’ve reached out to some people in the business in Spain, since the 2015 they all charge and pay the VAT, though none were or are working with a VAT-exempt company.

        I’ll definitely contact the Hacienda, thanks a lot for the contact detail. If I get any new or relevant info, I’ll sure share that here 😉

        Best regards.

        K.

  16. Hi Penelope, great blog – thanks a lot for the effort put in to help others. I am starting a business in Spain (in the property sector) and given that I will be paid in commission once a sale goes through, it is unlikely that I will actually earn anything for the first 4/5 months of being in existence, whilst the buying process is taking place. Can I wait until the point of the first income generated to register myself as autonomo? This would avoid having to pay social security fees until I start generating money.
    Thanks!

    1. Hey Thomas. Great question! On the Hacienda’s website, it says that you must sign up if you are habitually carrying out “una actividad económica a título lucrativo” (money-making economic activity). My opinion on this would be that you don’t actually know your activity is making money until you make your first sale. If Hacienda were to detect the activity, they might think differently. However, there is some precedence of people earning below the minimum wage (which you would be until you started making sales) not being fined for not paying social security. There has also been talk of officially legalising this this year. I wonder if anyone else reading this has experience with this they can share?

      1. Thanks a lot for your reply Penelope. One other follow up question – I am currently working full time (and therefore paying Seguridad Social through my current salary). In my free time I am trying to set up my business. Are you allowed to both have a full time job and set yourself up as an autonomo for a separate venture? And if you are, does the fact that you are already contributing to SS have any bearing on the autonomo amount you would pay? Thanks again in advance, Thomas.

        1. Hey Thomas! Glad it was helpful. I actually wrote an article about this – you might like to take a look here. Best of luck starting up your business.

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