Contracting in Spain

Introduction

Spain is largest country in Southern Europe and second largest in Western Europe. It is the only European country to have a physical border with an African country, although it also shares borders with France, Andorra and Portugal. It also borders the Mediterranean and Atlantic oceans and its territory includes various islands.

Spain became a unified country under the Catholic Monarchs after which Spain ruled one of the largest empires in history becoming one of the first global empires. This has left a large cultural and linguistic mark on the modern world resulting in Spanish being the second most widely spoken language.

Spain is a member of the United Nations, European Union, Eurozone, Council of Europe, Organisation of Ibero-Amercian States, the Union for the Mediterranean, the North Atlantic Treaty Organisation, the OECD, Organisation for Security and Co-operation in Europe, the Schengen Area and the World Trade Organisation. As well as being a member of various other worldwide organisations and having a permanent invitation to G20 summits.

Spain is a high income developed country. It joined the Euro in 1999 which improved its multinational status for companies and led to a global expansion which gave it an early competitive advantage which can be attributed to its common currency and language. This and its commitment to infrastructure has resulted in Spain ranking among the top ten for quality of life.

Spain is a perfect choice for freelancers that want the more cultural relaxed Mediterranean life without compromising on European and worldwide industry advantages. Chesterfield provides a wide array of Accounting Solutions for contractors in Spain including invoicing through a compliant company structures. Our dedicated staff have a thorough understanding of contractors needs and are professionally trained to provide the most appropriate solutions tailored to your personal circumstances.

Registry/Registration

You may only spend three months a year in Spain any longer then you must apply for a long term residence visa which allows you to stay in Spain for between ninety days and five years.

You will also need an NIE number, this is your foreign identification number. It is possible to apply for this before arriving in Spain via your local Spanish consulate or Embassy, please note that once you arrive in Spain you will need to renew this with your change of address and register with the local authority where you will be living. If you have not applied before entering Spain and you are an EU citizen then you can go to a Foreigners Office or police station in Spain to apply for this at the same time when you apply for your registration certificate. Non-EU can apply after receipt of their residence permit from the Foreigners Office.

In order to apply for residency you will be required to bring the following:-

• Original passport, as well as a copy of the passport.
• Three passport sized photographs.
• Completed application form, as well as three copies.
• Proof of address in Spain.
• Bank statements, please note that you may need to evidence sufficient financial resources to support yourself and your family.
• Medical insurance.
• Receipt for payment of the administrative fees stamped by a bank.
• If you have employment bring a certificate of employment or written proof that you have been hired.
• If you are self-employed you will need to show that you have registered on the Registration on the Economic Activities List.

It is important to note that for foreign documents to be valid in Spain they must be translated into Spanish and legalised.

After living in Spain for five uninterrupted years you can apply for a permanent residence whereas you can stay and work indefinitely under the same conditions as Spanish citizens. After ten years you can apply for Spanish nationality.

Income tax

Non-residents must report income and pay taxes on a quarterly basis. They are taxed at a flat rate on income arising from Spanish sources of 24% employment income up to EUR600,000 thereafter it would be 45% and 19% on capital gains or investment income. A person is considered a resident of Spain for tax purposes if they remain in Spain for more than 183 days in a calendar year or if their business or economic interests are located within Spanish territory.

Spain has a special expatriate regime whereas if you become a tax resident due to your assignment then you can choose to be taxed as Spanish tax resident or as a non-resident, but there are certain requirements to be met in order to apply for this regime, such as not obtaining income from a permanent establishment situated in Spain. Tax residents are subject to taxation on their worldwide income although there are exemptions providing conditions are met and usually there are tax treaty conditions that can also be taken into account.

Employment income withholding rates for tax residents are as following:-

19% up to 12,450

24% up to 20,200

30% up to 35,200

37% up to 60,000

45% thereafter

Social Security

The concept of social security first appeared in Spain in 1883 and so has been around for quite a while and therefore is a very comprehensive system covering over 90% of the population. Although the overall rate of social security in Spain is higher in comparison to other European countries the benefits are also more generous. It is also more flexible and rather than a flat rate it allows a degree of choice and you can make higher or lower contributions depending on what you hope to get out of it.

If you are living and working in Spain as a freelancer then you must register and pay into the Spanish social security system, there is a state scheme especially for the self-employed. You must be registered as self-employed with the Spanish tax office and complete the relevant Spanish social security form in order to get your social security number. It is important to note that although the system is adaptable there is a minimum monthly contribution regardless of how much was earned during this period, although if you are starting out as self-employed then initial discounts are available. It is important to check if there is a social security agreement in force between Spain and your home country as you may be eligible for exemptions.

The general contribution rate for freelancers is around 30%.

Employment Rules

Spanish labour law had it last major reform in 2012, although the framework has been in place since 1978. It is generally comparative with similar European countries in that it is comprehensive and focuses on protecting the employee. Foreigners working in Spain have the same rights and obligations as Spanish nationals.

To be a full time worker in Spain you must average forty hours per week. Please note that the maximum you can work in one day is nine hours unless there is an agreement in force which covers additional to this. It is possible to distribute working hours unevenly, but a collective agreement should be in place. Spain has a Public State Employment Service to which contracts are sent within ten days of coming into force. Spain has different types of temporary work contracts and therefore it is advisable that if you are unfamiliar with the system that you seek advice from professionals such as ourselves before entering into such a contract. Employers cannot make changes to the contract without complying with labour legislation and if these changes are to the employees detriment then the employee can terminate the contract.

In Spain there is a minimum of twelve hours that must elapse between the end of one work day and the beginning of another. You are entitled to at least one and a half days off per week. Overtime is set at a maximum of eighty hours per annum with the exception in case of urgently required repairs. Overtime at night is prohibited unless it involves expressly authorised activities. The holiday entitlement in Spain is thirty days per year.

Banks

Spain has a central monetary authority called Banco de Espana which supervises banks in Spain. Established in 1782 this is a member of the European system of central banks. Some of Spain’s top banks such as Banco Santander, which ranks among the biggest public companies in the world, have a global presence.

As Spain has a large expat community it has a variety of banks that cater to foreign requirements, including offering non-resident accounts making it possible to set up an account prior to moving to Spain. In addition to Spanish banks Spain has a number of renowned international banks if you prefer something more familiar or if you are concerned that the local language might pose a problem for your banking needs.

Banking hours are normally 9.00am to 14.00pm Monday to Saturday. If you wish to visit the bank in order to arrange an account you should have your passport, foreign identification number and certificate, proof of address and proof of employment. If you do not speak Spanish then you may need an appointment with an English speaking member of staff. Likewise if your documentation is not in Spanish then it may need to be officially translated.

Borderless online accounts are becoming increasingly popular and can now be an alternative to opening a domestic account if this proves to be too problematic. We can advise on the different options and offer solutions.

Corporate Structures

If you wish to contract in Spain then we have the solution for you, whether you require Spanish self-employed services or Spanish employed payroll services. We can also assist you with the associated filing and taxation matters such as whether the taxes are deducted at source. If you prefer the self-employed solution then this is not deducted at source and the gross amount is sent, but the responsibility for dealing with payment of taxes is that of the contractor although we can of course assist with any queries and formalities. We do have provisions to provide a Spanish accountant who can prepare and submit self-employed tax returns on your behalf. If required we can also offer establishment of your own company and can structure the invoicing to your particular needs.

Chesterfield and Contracting in Spain

Chesterfield has years of experience with contractors and freelancers working in other countries and a variety of schemes and solutions in order to make life easier. You will be given a dedicated member of staff who is responsible for all your administration and contact, allowing them to be more in tune with all your needs and assist you in every way possible.