An Autonomo is actually a broad term, applying to self-employed people or freelancers (profesionales autonomous), as well as people operating in small businesses such as a sole trader (empresa individual) or partnership (sociedad civil).
Most people starting a small business or setting themselves up in private practice opt to go Autonomo because it’s the quickest, simplest and cheapest way of registering a business.
The most common alternative is the limited company (“Sociedad Limitada” or SL). We generally only recommend new business owners create an SL if you anticipate fast growth, or need liability coverage for the kind of services you offer. Otherwise starting as an Autonomo is generally the best option.
When starting a business or setting up as self-employed, Foreigners and Spanish nationals are all treated the same, although expats need a foreigner’s identity number (NIE) to register.
The rules are the same for mainland Spain as well as the Canary Islands, but as we’re based here in Lanzarote, there are some small tax differences like IGIC – our local VAT.
Getting started as a non-EU, EEA or Swiss National
In addition to the NIE, if you’re a non-EU/EEA/Swiss national, you may need a freelance visa to enter Spain or the Canary Islands, and a residence permit to stay and work as a freelancer or self-employed person here.
In that case, you’ll also need to submit form 036 to get an NIF tax identification number, plus liability insurance or seguro de responsabilidad civil.
The actual process to set up as a freelancer or self-employed worker in the Canary Islands is relatively straightforward, although can be a time-consuming process, but don’t worry we do all the work for you to make it as simple as possible.
Incentives for new Autonomos
The Canarian government wants to encourage Autonomos to set up here on the islands.
To help get you started on the right foot, they offer a reduction in social security payments for your first year, when you’ll pay just €80 a month in contributions.
In your second year, this will continue as long as your net income is below the Minimum Interprofessional Wage (SMI).
Once your income exceeds the SMI, or you reach the end of your second year as an Autonomo, you’ll start paying monthly contributions which correspond to your income bracket, starting at €225 a month for the lowest earners.
As an added bonus, male Autonomos under the age of 30 and female Autonomos under the age of 35 can apply to extend this introductory rate by one more year if they are still earning under the Minimum Interprofessional Wage (SMI).
What about tax?
When we register you as an Autonomo, we’ll register you to pay your Social Security contributions and tax, and with a “Mutua” or health insurance company, who’ll cover you in case of work-related accidents or injuries.
You’ll make your social security contributions each month, and they’ll be taken directly from your bank account under the Special Regime for Autonomous Workers (Régimen Especial de Trabajadores Autónomos or RETA).
As an Autonomo, you’ll generally have to present quarterly IVA (VAT) returns and an annual income tax return (I.R.P.F.). Other declarations are often applicable on a quarterly and annual basis, depending on what type of work you do and your other circumstances.
Don’t worry if it sounds complicated, we’ll advise you of what’s needed and take care of all the returns on your behalf.
You’ll give us copies of all your invoices each month so we can keep your official books in accordance with the local regulations, and we’ll calculate the returns each quarter to let you know how much you need to pay.
We send copies of your returns via our easy to use app and notifications via email so you always know what’s due, and when.
IRPF or personal income tax will be likely at the same rate as everyone else. Every year, you must complete a tax return calculating how much tax you have paid during the year. Again, we’ll prompt you when this is due and take care of all the calculations on your behalf.
As a self-employed freelancer or “Autonomo”, you’ll need to start charging IGIC, our local equivalent of VAT, when your annual turnover reaches or surpasses €30,000. Just to be clear, this threshold is nothing to do with your regular tax obligations, it only applies to IGIC.
At the end of each year, we calculate whether you’ve reached this threshold, and advise you when you have.
If you began your business part way through the year, it’ll be evaluated proportionally to the number of months you worked. So if you started in July and worked half the year, and surpassed €15,000 which is half the amount, you would begin applying IGIC the following year.
It’s important to understand that you’ll only charge IGIC to clients based in the Canary Islands and any private individuals based outside the EU.
Tax rules vary depending on who the final client is, i.e. an individual or a business, and where they are based, for example inside the Canary Islands or outside, in the EU or outside the EU, or worldwide.
We’ll discuss all this with you when we first meet, and advise you of how and when to apply IGIC if needed.