Spence Clarke & Co. Chartered Accountants - Tax Consultants - Company Law

Self employed persons (autonomos) and small companies represent 95% of the Spanish economy. In particular, autónomos are very relevant to the growth of the Spanish economy although there have been very few incentives to stimulate the creation of small business from a tax and social security perspective. The Spanish Government made a timid effort in 2013 but recent pressure from the centre-right political party Ciudadanos has brought into law new measures to help autonomos set up new businesses and create employment. These are measures that should have been enacted years ago but its better late than never!

The new law Ley 6/2017 of 24 de Octubre, de Reformas Urgentes del Trabajo Autónomo was  published in the State Gazette on 25 October 2017. In this law the Government has created measures to "urgently reform self employment".

In November 2016, the traditional right and left wing parties PP and PSOE agreed to consider measures promoted by the new Spanish centre right political party "Ciudadanos".They accepted that the reforms of 2013 did not go far enough in helping the autónomos of Spain. It took almost a year, including eight months of parliamentary debate, to get measures approved.

Following the publication of the new law, some of the changes are now in place, but others will not apply until 1 January 2018.

Perhaps the most popular incentive is the so called "tarifa plana" whereby autónomos may benefit from a reduced social security payments following the set up of a new business. Instead of having to pay the minimum social security contribution of 270€ per month, a flat payment of 50€ will apply for the first 12 months, improving the previous deal that lasted only 6 months.The new social security deal now provides:

  Now Normally Total saving
First 12 months 50€ 270€ 2.640€
Months 13-18   270€  
Months 19-24   270€  
Months 25-30 (only women under 35 and men under 30)   270€  

The new deal only applies to new businesses registered after 1 January, so the message is clear: Do not register now but wait until the New Year and you will save 1.320€!

An odd strategy for a country that desperately needs to get people back to work and needs to eliminate the hidden economy culture. Amusingly, the statistics show that the unemployment actually increased by 7.000 in November 2017. Expect a sharp drop in "unemployment" in January....

There are other popular measures. For example, from January you can register as an autónomo in the middle of a month, but only pay the social security for the effective number of days you are registered in that month.You can also deregister part way through the month and only pay for the days you work. And you can register and deregister up to twice a year!

Wow, spectacular changes! Well, we are accountants so these things are exciting....

Joking apart, these are very welcome improvements and make the system a lot fairer and should help people keep to the law instead of having to bypass it in order to survive. Anyway, as we say, every little helps…..

We should also mention other changes that are attractive. For example, in 2018 an autónomo will be able to employ staff without losing the right to the "tarifa plana" and a person who reaches retirement age (normally between 65 and 67 years) will be entitled to receive the Spanish pension while still self employed. It may seem odd to those from other countries but in Spain, until now, you are not allowed to work as self employed and claim the state pension that you have paid for during perhaps 40 years of working. Inevitably, such a ridiculously unfair system invites abuse.

A few changes are already in force: the employment of disabled people or family members will now be more attractive as there will be significant reductions to the employer's social security payments. Also, an autónomo who has to take care of his/her children or relatives with special needs, will be entitled to get a social security exemption for up to 12 months. I like this one as this is a recognition of the need for autónomos to reconcile work and personal matters, and the exemption can be up to 3.250€!

Finally, a small but useful change to income tax for the autónomos. The new law clarifies what home property expenses can be deducted as business expenses. This has always been a matter of disagreement with tax inspectors as the law is subject to wide interpretation. In future, property expenses, including rent, will be deductible for the proportion of your home that you use for your business. Sadly, only 30% of such costs will be allowed as a deduction from income.

It seems that the legislator cannot imagine that autónomos work more than 50 hours a week and cannot bear the thought of allowing property expenses during the hours you do not work. Let's remember that the legislator is a civil servant, not especially renowned for their long hours of work, so we should regard the allowance for 8 hours a day as being very generous.