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Business culture in Spain

Modern Spanish business culture and etiquette

Office in Spain - doing business.
The office I used to work in, Friendly Rentals.

Wow, this title sounds like something out of a textbook. I wanted to write this post, because in my experience there are a lot of lies around about Spanish culture and business etiquette in Spain going round. “You’re expected to arrive 30 minutes late” is one of them (this is most definitely not true for a job interview, for example), “it may be difficult for a woman to pay for a man’s meal” another (if only!). If people know you’re from another country, they tend to accept you for what you are, especially if the organisation you’re working with is modern and operates multinationally. That said, every culture has its quirks, and Spanish business culture is no different. Here’s a few points on doing business in Spain, but do be aware that they’re not “one size fits all” rules – every company is unique.

Doing business in Spain – dinner time

  • It’s ok, and even advisable, to keep your hands on the table when you’re eating and in between courses.
  • Spain is a “one glass of wine” culture, especially in business settings. It’s common to enjoy a glass of red with a meal (bottles are still sometimes served in work canteens), but getting plastered on a Friday night with new colleagues is less common than in the UK and usually considered unprofessional. Order Spanish plonk to make a good impression. Cava for special occasions only.
  • Unlike the UK, it’s always obligatory to say “have a nice meal” to people you see eating.
  • During the middle of the day, it’s quite common to go for a “menu” – a three-course meal with more limited options than normal, served at a set price. Lunch is a much bigger meal than in other places, and is almost always a proper meal rather than a sandwich.
  • Tipping (in Barcelona, at least) is far less common, although you might leave a few coins to round up and be considered generous.
  • After a long lunch, time is taken to drink coffee and chat. This even has a special name – “la sobremesa“.
  • It’s common to skip breakfast and take a pause mid-morning for coffee and a quick sandwich or bowl of cereal.
  • Dinner is normally after 9 pm.
  • Make sure you put olive stones around the side of the plate, rather than in the dish with the other olives. I made this mistake once and was mortified.
  • A “porron” is a kind of wine funnel which you pour directly into your mouth at special occasions. If one is wheeled out while you’re doing business in Spain, be careful and do not be afraid to decline, as it’s very easy to make a mess.
  • It’s very uncommon to order things that aren’t on the menu, and the Spanish are very unfussy in this sense. “No mayo, extra lettuce and soya instead of normal milk” will be met with suspicion, especially in more traditional establishments.
  • It’s a complete lie that there are no vegetarians in Spain, especially modern, cosmopolitan Spanish culture. But in some circumstances, vegetarianism will be more difficult.
  • Cutlery is re-used for the main course, so take it off your plate and leave it on the table after your starter.

Doing business in Spain – what to wear

  • Despite being hotter, showing lots of skin is less common, especially when doing business in Spain. Women – beware the mini-skirt (men wearing mini-skirts may also raise some eyebrows).
  • In Barcelona at least, people are masters of the difficult art of smart casual. Watch and learn.
  • Wearing bright colours is less common in Spanish culture than others.
  • If you’re not sure what to wear to a casual occasion, you can’t go wrong with Spanish fashion brand Desigual.

Doing business in Spain – greetings

  • Men shake hands. Women and men, and women and women who have a close relationship kiss on the cheek (once on the left, once on the right). In business, kissing in the cheek is less common – if in doubt, shake hands. If you accidentally kiss your employer (as has happened to me before I cottoned onto this), it can be quite embarrasing.
  • Sensitivity to political correctness is different in Spanish culture – women shouldn’t be surprised or offended if a male colleague tells them they look good or comments on their outfit.

Doing business in Spain – other

  • In general, Spanish culture is quite direct. Openess and honesty are valued highly, and tact and sensitivity perhaps not so much as in the UK.
  • Interrupting is often considered a sign that you’re engaging in the conversation, rather than rudeness. It’s your duty to contribute, and not participating is looked down on when socialising and doing business in Spain. Follow your lead from others, however – it might not be wise to shoot your mouth off when your boss is in the middle of a speech.
  • Regional identities are strong in Spanish culture, and people are normally enthusiastic to talk about their local area, food and way of life.
  • Remember that everyone is different. Take people as you find them, and avoid mentioning stereotypes – Spain is such a big country that these are often just untrue.

Text and photos by Penelope

Categories
Tax

Taxes self-employed people pay: Spain v. UK

The c/Perill, Gràcia.

After hearing many times that the UK system is much better for low-wage self-employed earners, I decided to do a quick comparison of the differences versus comparative benefits in tax rates for a self-employed person in each country. I tend to just write about what I know, so this comparison is based on someone who would be in my situation – a young woman doing the type of work I do (online marketing, translation and writing web copy, in case you’re interested).

Here’s the results:

The cost of being self-employed: Spain v UK

Spain

See this article for info about what each type of tax is for.

Costs

  • Social security – around 50€/month for the first six months, rising to 130€ for the next six months, rising to 180€ from months 12-15 and 250€/month from then on
  • VAT – 21%
  • IRPF – 9% of what you earn is retained by companies, rising to 21% after the first couple of years.
  • IRPF – Those of you with clients overseas (like me!) retain 20% of your profits to pay in to the Government. If over 70% of your clients retain IRPF for you, you don’t have to pay this. A percentage of the IRPF you pay in will possibly be returned to you, and you can offset the IRPF you’re taxed here against the 9/21% Spanish clients hold back for you.

Benefits

  • 16 weeks paid maternity leave (around 850€/month)
  • No unemployment benefit
  • Paid sick leave (around 510€/month for day 4-20 and 640€/month from then on)

UK

Costs

Figures here are highly approximate, as I don’t quite understand the UK system as well and am just going on what I’ve been told. My sources say that your taxes (presumably not including VAT) come to around 20% of your earnings.

  • VAT – 20%
  • Council tax (say £1000/year)
  • Income tax – 20% on earnings over £8,500/year
  • NI contributions – Say £10 per week

Benefits

  • No paid maternity leave
  • No unemployment benefit
  • No sick leave

Would be great to hear from readers from both countries if they think these figures sound about right. In any case, I hope it gives you a rough-and-ready idea of the different systems and what you’re up against in both. Which system would you prefer to work under?

Text and photos by Penelope

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Business culture in Spain

The number of people who are self-employed in Spain grows for the first time in five years

A valley called Areu in the Spanish Pyrenees.

Becoming self employed in Spain has never been so popular. A recent study by organisation ATA, the National Federation of Associations of Self-Employed Workers, shows that, just a month away from the end of 2013, the number of people registered as self employed in Spain has gone up by 17,944 since the end of 2012.

2013 bucks the trend in terms of self-employed workers

In contrast, in the years between 2008-2012, the amount of autónomos listed on the tax register decreased by nearly 400,000.

I can think of several possible theories for why this might be. The glass-half-empty point of view says that businesses are taking advantage of the desperate economic situation of many in order to hire people for whom they don’t have to pay holidays, social security, sick leave or anything of the like. The glass-half-full point of view suggests that this is perhaps a sign that the economy’s starting to pick back up.

In any case, one thing is obvious – with in increasing amount of people registered as self-employed in Spain, it’s going to get harder for the government to ignore autónomos rights to things like unemployment benefit. I’ll be at the front of the picket lines for things like reducing taxes for low-wage self-employed earners and generally opening up the economy this year.

Text and photos by Penelope

Categories
Business culture in Spain Tax

Why I avoid working “in black”

A Coruña, Galicia.

Working “en negro“, i.e. without divulging your earnings and paying tax on them, is very common in Spain (not surprising, when you consider how complicated and inflexible the tax system is). In fact, I’m often advised by friends and contacts to work in black.

Although it’s one thing to do the odd favour for a good friend from time to time (and if you’re paid in beer anyway, what is there to declare? ;)), in general my policy has always been to avoid working in black.

There are two types of businesses in Spain : those who will need you to declare tax and write them a “factura” (invoice), and those who won’t ask for one. Some might think I’m a fool, but I always try to deal with the first kind, even if it means my services run the risk of being uncompetitive at times compared to all the people working illegally out there. Here’s my reasoning:

  1. Serious businesses work with facturas. And where do you think the higher profit margins are, with serious businesses or less serious ones?
  2. Offering to give your services without paying tax devalues your work and implies that you are not a professional, thus restricting the amount you can charge.
  3. When you pay tax, the best policy is to pass the extra costs on to the business you’re working with so you still get a fair wage. Are you willing to run the risks tax fraud involves just to save your clients money?

People often complain to me that their clients just won’t pay the extra costs of tax rates. My response is that in that case, you’re possibly better off looking for clients who do. There are some of them around. And they tend to be better employers.

This is a personal subject, and there are always exceptions, especially, I think, when you work with end consumers and not businesses. If all you want to do is earn a few bucks giving English classes to friends of friends on a Saturday morning in addition to your day job, you might decide just to skip the whole rigmarole of signing up as self employed altogether. But if you want to do serious business, and especially if you deal with businesses and not consumers, unfortunately you also need to get serious about your accounting and paying your tax.

Photos and text by Penelope

Categories
Tax

Writing an invoice (“factura”) for clients from abroad

This is actually in France (Marseille).

If you’re required to write a “factura” for abroad clients, you might like to start off by reading my recent entry on writing an invoice, which gives you a basic guide on how to write an invoice if you’re a self-employed person paying tax in Spain under local systems. Then, come back here and I’ll talk you through writing invoices for clients from abroad, which have a few small differences.

There are two technical terms you might hear bandied around: “intracomunitario” clients come from within the EU, and “extracomunitario” clients are non-EU. In any case, writing an invoice seems to follow the same procedure for both. This article applies to those who sell services, rather than products.

1. NIF – Instead of including the client’s NIF (“Número de Identificación Fiscal“), you’ll need to include whatever the relevant business or VAT identification number for them is.

2. Taxes – Here comes the good bit. Technically, if the business you are selling to doesn’t have an office in Spain, the work you do is realised in their country and thus falls under their norms. As a result (and please see my disclaimer below, as this is just in my own experience, and I can’t 100% guarantee it’ll be true for you), you don’t have to pay any IVA (VAT) on services sold to countries outside the EU. Neither do they have to hold back any IRPF on your behalf. This makes sense (when does not paying tax ever make sense?), because who would they pay the IRPF forwards to? Not the Spanish government, certainly.

Those trading digital services within the European Union – you might like to read this article, concerning recent VAT changes.

2.* Taxes #2 – Bear in mind, however, that if over 30% of your business comes from abroad, you’ll have to pay in 20% of your profits in IRPF every trimestre in any case. But you don’t have to put anything about this on your invoice.

3. Additional – If you’re being paid in a foreign currency, you should also put a note on your invoice to state how much this represents in Euros:
“9.999 € día 16/12/2013”

Photos and text by Penelope

Categories
Tax

Self-employed people hiring other self-employed people

Flowers.

A month or so into my journey of self employment in Spain, I came up across the following question:

“Can an autónomo hire another autónomo?“

This actually wasn’t because I needed to hire any self-employed people (hopefully one day!), but because a client/friend wanted to hire me and had no idea how to do it.

So I looked into the issue a bit, and made a few calls to the Hacienda. It turns out that it’s actually not too difficult to hire a self-employed person (probably why many businesses, in this day and age, do so to get round the laws that require that they might actually have to pay for their employees to have holiday time and social security benefits). This is how you do it:

When you write your invoice for the person employing you (don’t forget to include VAT!), you’ll need to include a line for the IRPF tax as described here (IRPF is normally 9% for the first couple of years of business, and 19% afterwards as of January 2014, depending on the sector you work in. I hope to write more about paying IRPF soon). It is the responsibility of the client to hold back (“retener“) this tax for you.

If you’re a self-employed person hiring another self-employed person, you’ll need to fill in an extra form. This is called the “Modelo 111” and should be filled in every trimestre. You can fill it in online. In this form, you declare the IRPF you have held back for your self-employed employees. Hopefully, the government will return a part of the IRPF paid back to you when you fill in the annual “Declaración de la Renta“.

In theory, you also need to provide a contract. For self-employed people, this is a special kind of contract called a “Contrato Mercantil“. I found a sample contract here (quick disclaimer: as I say many times, I’m not paid nearly enough to be a lawyer, and I can’t endorse this contract on any level apart from saying “looks alright to me”).

In all honesty, however, I’ve only ever had one client (my biggest one) who’s actually written a contract for me, and he’s from the States, so I don’t know to what extent this is actually a requirement unless there is some kind of legal dispute. Might be worth writing one for big projects with a large payoff at the end, where you would be at a serious loss if they didn’t come up with the goods.

Photos and text by Penelope

Categories
Tax

Can the self-employed receive unemployment benefits?

This is a bike shop in the Raval.

Conditions for self-employed people in Spain seem to be, very slowly, improving, and one of the laws which has recently changed is the 2013 law which allows the self employed to claim unemployment benefits or “el paro“, as it’s known locally.

There’s a long list of requirements you need to be able to fulfil to do this, however, and amongst them includes a requirement to pay an extra 2.2% in social security, meaning that your monthly payments will be a minimum of €281.84 instead of €253.36. This is because you choose to include in your social security payments cover for “cese de actividad” (cession of activity).

Other things you must do to claim unemployment benefit if you’re self employed:

  • You must retrace the steps you made when signing up as self employed, and sign off due to cession of activity.
  • You must have been paying into the social security systems for at least a full, continuous year.
  • You must be up to date with your social security payments.
  • You must not be old enough to retire.

The first point in particular seems to cause problems – I’ve read that eight of ten applications to claim unemployment benefits are rejected as it was too difficult to justify the cession of activity. You will need things like a stamped certificate and past records, and will need to prove that your business is making a real loss (ignoring any right you might have to a salary).

Text and photos by Penelope

Categories
Business culture in Spain Tax

Mind-blowing quotes from the Hacienda/Seguridad Social

You find this church walking down the Rambla, on the left.

To give you some idea of what you’re up against when trying to negotiate the tax system and set yourself up as self-employed in Spain, here is a choice selection of my favourite quotes from the Hacienda (Inland Revenue) and Seguridad Social (National Insurance). All these quotes have been either contributed by friends or form a part of my own experience:

“From your side of the desk, what you’re saying is understandable. But from my side of the desk, no dice.”

“Here, you have many obligations, and few rights.”

“You are lucky that we will not fine you for this.” (After wrongly advising someone about the VAT rate they should charge, and then coming back six months later to collect the excess)

Feel free to contribute your own mind-blowing quotes from the Hacienda.

Text and photos by Penelope

Categories
Tax

Forms you will need to fill in if you’re self-employed in Spain

If you’re self employed in Spain, there’s various bits of paperwork you’ll have to do to declare your earnings (or losses if you’re unlucky!) and pay the correct tax rates. This is where the fun begins.

Paperwork for the self-employed in Spain

First and foremost, when you’re signing up as self-employed you’ll have to do various bits of paperwork, including filling in the Modelo 036/037 in the Hacienda and filling in forms in the TGSS. Get more info on both of these initial steps in our article.

Once you’ve done that, the majority of people working self-employed in Spain will have to fill in the following forms. These are divided into declaraciones informativas (you only need to give info) and forms where you will need to pay.

The basics

  • VAT: All companies must declare their VAT every year in the Modelo 390 (information only), and once every trimestre using the Modelo 303.
  • IRPF: The Spanish equivalent of the poll tax or income tax needs to be declared every year in the Declaración de la Renta (Modelo 100), which everyone in Spain needs to fill in.
  • Operaciones con terceros: Anyone setting up business in Spain withdealings of over €3,005 per year with another client or provider needs to fill in Modelo 347 once a year.

Added quirks:

  • If you are in the “Regimen Simplificado del IVA” (mostly for farmers and fishers – if you don’t know about it, you’re probably not), replace VAT Modelo 303 with the Modelos 309, 310 and potentially 371 as well.
  • Some people (like me, as I have lots of overseas clients) will need to declare the IRPF they earn once every trimestre using the Modelo 130 as well as the declaración de la renta. If you’re in the “Estimación Objetiva del IRPF” (your tax levels are based on predicted rather than actual income – again, if you don’t know about it, you probably aren’t), you will need to fill in the trimestral Modelo 131 instead.
  • Operaciones intracomunitarias: If you work with the EU (either you sell your services to clients here or buy EU products), you will need to fill in Modelo 349 (information only). This is done once a year if your total dealings are less than €35,000.

If you are running a business in Spain and employ people, or rent a building, you’ll also be required to fill in scary-sounding forms like the 111, 115, 180 and 190. Or even the 184. Or the 123 if you deal with loans or dividends. There are also plenty more forms for large businesses or non-standard business models, but, let’s face it – if this is the case, it’s probably worth your while to employ an accountant anyway.

Note that the deadlines for each trimestre are: 20th April, July and October and 20th/30th January. Operaciones con terceros has to be handed in in February, and the Declaración de la Renta in May/June.

You can now do your tax in Spain online by downloading an electronic signature.

Categories
Tax

Signing on as self-employed at the Seguridad Social

Once you’ve signed on as self-employed at the Hacienda, those opening business in Spain need to communicate to the TGSS (“Tesoreria General de la Seguridad Social”, which in the UK would be known as “National Insurance”) that you’ve become self-employed. They will then start taking your monthly social security contributions out of your account. You have around thirty days to do this after you’ve signed on at the Hacienda.

You’ll need to take yourself down to your local TGSS office to become autónomo in Spain (here are a list of “delegaciones” in Barcelona). This part is very simple – you’ll need a photocopy of your passport, your NIE number and a photocopy of all the pages of your Módelo 036 or 037. You’ll fill in a form which you’re given, and – hey presto – you can now start paying social security contributions. Maybe you won’t be as keen to start celebrating this one. You’ll also be asked to choose a “mutua” (health insurance company) who will pay your insurance if you get sick – I choose one which I was advised by the woman at the counter as being one of the largest.

Next: signing on as self-employed at the Hacienda