Costs to expect when you’re self-employed in Spain

Founding a business in Europe is no small feat. A good idea can quickly get sidetracked by unexpected admin, so it's essential to evaluate the pros and cons of your planned activity early on.

Understanding the costs of being self-employed is key in evaluating whether it’s viable in the long run.

In Spain, registering as “autónomo” (self-employed) means you have to pay what’s known as the self-employed quota (cuota de autónomo) on a monthly basis. On top of that, there are expenses related to VAT, income tax, management, and other operational services to keep in mind.

Once you’ve taken account of the potential costs, tax liabilities, and regulations, setting yourself up as a freelancer is relatively straightforward. However, foreigners have a few extra requirements and processes they’ll need to anticipate.

Sound a bit overwhelming? Don't worry, we’ve written this article to break everything down step by step.

Business plan notwithstanding, you’ll quickly realize that any entrepreneurial endeavor comes with its own range of costs.

For example, running the same business in different parts of Spain can result in radically different financial outcomes.

If you live in a village with fewer than 5,000 residents, your monthly administrative fees - the self-employed quota - will be much lower than those of a freelancer in Madrid.

Whatever the amount, one thing is certain: every entrepreneur has to pay their monthly self-employed quota. The costs of being your own boss vary according to the type of business and your personal situation, but we can make some estimates.

The self-employed quota is the main fixed cost of being self-employed in Spain, calculated at an average of €283 per month in 2021.

However, new companies - freelancers and many traditional businesses - meet the requirements for the flat rate in the calendar year they’re established (starting from January 1st). To help get your activity started, regardless of your monthly income during the first year of business, everyone pays the same simple quota (€60 per month).

For most entrepreneurs, the exact amount depends on what type of business you do and the tax exemptions you receive.

There are a series of reduced rates in the RETA (Special Regime for Self-Employed Workers), applicable to different groups, such as freelance collectives, freelancers with disabilities, young people, autónomos from Ceuta and Melilla, workers over 65 years old, or people who’ve wound down their business due to maternity or paternity.

The system is evolving (and your status will change over time), so it’s important to always have a rainy-day fund in your professional account at the end of the month to pay various fees and avoid social security surcharges.

As part of the RETA autónomo scheme, self-employed workers must contribute to social security from the first day they start their business, and they must pay their quota on the last day of every month.

In 2021, the Spanish government announced changes in the retirement system resulting in autónomos being entitled to the same monthly pensions as salaried employees, increasing freelancers’ overall RETA contributions by 50%.

Consequently, freelancers’ tax obligations have evolved over the last few years, with 2024 figures as follows:

All autónomos in Spain pay their self-employment quota and other related taxes. On top of these fees, there are many other common expenses.

If you want to set up a brick-and-mortar business, keep in mind that rental costs vary tremendously depending on the city and the area. If you’re looking for alternatives, you can opt for a coworking space or start out working from home.

If you work from home, the housing supplies can be deducted in the percentage resulting from applying 30% to the proportion of the housing area dedicated to the activity.

Simply put, you can deduct 30% of your home costs if you allocate it towards business purposes. You must have communicated this on a form 037 that you work from home and have the utility company invoice with your details on it.

If you choose to work from home, home ownership expenses (mortgage repayments, property tax, homeowners’ association fees, etc.) are tax deductible in proportion to the part of your house dedicated to the activity, considering the percentage of the property that an autónomo owns.

For example, if you own half of your house and allocate 40% of that space to business purposes, the deductible expenses are 20%.

It's impossible to control everything that happens; there are always unforeseen events, oversights, or accidents that can end up costing a large sum of money to a third party. Civil liability insurance covers the self-employed person against liability to third parties arising from professional activity. The price depends a lot on the type of business you conduct. In many industries, clients will require proof of some form of liability insurance before signing a contract.

Bank commissions are another expense to consider. Many business accounts can have complicated fee structures - transaction fees and the like - whether they’re traditional banks or not. Each bank offers different conditions, so it’s worth analyzing them to choose the one that can offer you the best deal (for your business needs). It’s important to look for transparency and predictability when setting up a business account.

To deduct phone and internet expenses from your taxes, they must be exclusively for business use. Generally, autónomos are required to have two contracts: one for business and one for personal use. On top of this, companies with professional email accounts must pay for a domain name and web hosting.

Let’s finally focus on the biggest taxes for freelancers - VAT and income tax. Just as a heads up, we recommend you take any specific questions to a certified tax advisor.

VAT (value-added tax) is a tax on the sale of products and services. There are different types, but the most common one you’ll have to deal with is general VAT at a rate of 21%. Almost all of your income and expenses will involve VAT.

It is important to note that not all freelancers have to file a VAT return. For example, if you’re under the equivalence surcharge, you don’t have to file this tax. The equivalence surcharge is a special kind of tax that's part of the VAT system. It’s meant for businesses that sell products just as they bought them, without changing them in any way.

Realistically, VAT shouldn’t be considered a cost like most others. Every three months in your quarterly declarations, you’ll be able to refund the difference between what you’ve been paid and what you have actually charged (excluding the amount subject to the tax).

In summary, you will have to pay every three months the difference between the VAT on your income invoices and the VAT on your expense invoices.

The other tax is income tax, which works differently from VAT, and depends on your specific circumstances. However, like VAT, you’ll also have to settle it every three months.

Not all self-employed people pay the same:

• Professional self-employed with less than three years of professional activity: 7%.
• Professional self-employed with more than three years of professional activity: 15%.
• Every case is unique, so online calculators exist to estimate your personal obligations.

It’s important to know that being self-employed has fixed associated costs that you’ll have to consider: the self-employed quota, mortgages and rent, communications costs, liability insurance, bank fees, etc.

Additionally, you need to pay quarterly taxes like VAT and an income tax. On top of these, expect to see costs for utilities if you work from home and coworking expenses if you share an office.

Although we’ve shown it can be rife with admin, being an autónomo (freelancer) in Spain offers a flexible and independent way of working. Whether you're a taxi driver, digital marketer, or physiotherapist, becoming an autónomo allows you to manage your professional life your way.