Working as an autónomo in Spain - Tax Matters
Thread poster: Robert Long

Robert Long  Identity Verified
United States
Local time: 11:53
Member (2012)
Spanish to English
+ ...
May 25, 2015

Hola a todos!

I'm aware that the taxes are a complicated matter and that I will ultimately need to consult a tax advisor/gestor/asesor, but I was just curious if anybody working in Spain as a translator (preferably non-EU expats from the US) could give me a little insight into the tax procedures and what to expect. Assuming earnings of around €4000 per month, and taking into account the €250 SS contribution and the standard business deductions (internet costs, home office, etc.), what could one realistically expect to owe in terms of taxes, and how difficult is it to avoid double taxation between Spain/US?

Also, is the immigration process fairly straightforward if you can prove self-sufficiency as a self-employed person?

Any help at all would be greatly appreciated.


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Angela Rimmer  Identity Verified
United Kingdom
Local time: 19:53
Member (2014)
German to English
+ ...
Dual taxation treaty info May 25, 2015

I don't work in Spain but as a US citizen living and working in the UK, I can tell you that with the dual taxation treaty between the US and Spain, you just need to provide a certificate from the Spanish tax authorities saying that you are liable for and pay taxes in Spain, and that will exempt you from paying taxes to the US government. You would provide this when you file your US taxes every year.

Here's info from the IRS about the dual taxation treaty with Spain: http://www.irs.gov/Businesses/International-Businesses/Spain---Tax-Treaty-Documents


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Robert Long  Identity Verified
United States
Local time: 11:53
Member (2012)
Spanish to English
+ ...
TOPIC STARTER
Thanks! May 25, 2015

Thank you Angela, this is a great start. This is a part of the "totalization" agreement between Spain(/UK) and the US, right?

Did you move to the UK in the context of a self-employed person or via another method?


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Tomás Cano Binder, BA, CT  Identity Verified
Spain
Local time: 20:53
Member (2005)
English to Spanish
+ ...
My two cents May 25, 2015

Unfortunately I cannot help with the immigration side of things.

Just as a quick figure: for an after-tax income in the amount you mention, in Spain you would probably pay around 25-27% income tax all things considered. However, this kind of percentage would require you to get a private retirement plan and make contributions to it of at least 10,000 euros per annum. These amounts paid into the retirement plan are deducted from the taxable income, as are the amounts paid for social security.

As for expenses and deduction for home office, etc., I do not think they are as relevant as you might imagine in the kind of net income mentioned: you can only deduct such expenses in the same proportion as the proportion of your working space in the total surface of the home. If the room in which you work is only 15% of the home, you can deduct 15% of the expenses. You can of course write off the value of computer equipment you buy for your business (minimum write-off period is 3 years, not faster). Software under 600 euros cound as direct expenses; over 600 euros, has to be written-off over a period of 3 years as well. Travel expenses are direct expenses as long as you can reasonably claim that they are business travel expenses and not personal travel. Other minor expenses like restaurant bills, coffee outside, presents, postage costs, etc. can be put into the expenses directly as long as you can prove that they were linked to business. Our tax office is very picky about these things and can turn down any insufficiently documented expense.

One important note is that the amounts paid into the retirement plan are not recoverable until retirement except on severe conditions (permanent disability, long-term unemployment, etc.) which vary from one plan to another, so if you only envision staying in Spain for some years and then return home (which I reckon would be the most plausible scenario for any expat) and therefore do not get a retirement plan... your taxable income is higher and so it the income tax.

Indeed, it is best that you discuss this with an "asesor" so that they can calculate based on your usual figures.


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Angela Rimmer  Identity Verified
United Kingdom
Local time: 19:53
Member (2014)
German to English
+ ...
To answer your questions... May 25, 2015

Robert Long wrote:

Thank you Angela, this is a great start. This is a part of the "totalization" agreement between Spain(/UK) and the US, right?

Did you move to the UK in the context of a self-employed person or via another method?


To answer your first question, I have no idea.

To answer your second, I went to the UK for university, got a job right after uni working for a translation agency here in the UK, and eventually went freelance -- but by that point I had already naturalized (so now I'm both a US and UK citizen).


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Sheila Wilson  Identity Verified
Spain
Local time: 19:53
Member (2007)
English
+ ...
Not that complicated May 25, 2015

I wouldn't say things are too complicated here, though they are fairly expensive. I'd be very happy to give my asesor the push if I spoke Spanish fluently. But that's a long and winding road.

I'm an EU citizen so can't help on the other points. I do know that they are actually policing things nowadays. The days of living under the radar have gone.


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Cristina Usón Calvo  Identity Verified
Spain
Local time: 20:53
English to Spanish
+ ...
Freelancing in Spain is not easy... May 26, 2015

I guess you are asking because your main clients will be based in the US. I am currently working for a US-based client and inovoices are exempt from VAT, but I don't know if that works for expats from the US...

Anyway, to become a freelancer here first you have to register in the Treasury and then in the Social Security System.

As a freelancer here you have to pay a min. of 260€ as social security contribuiton each month. There is a special condition which states that if your income is less than €9,000/ year, you are exempt from paying the S.S contribution. However, the clauses about this condition are really sketchy and even the S.S. officials tell you not to bet for this formula, just in case you find trouble in the future with the System.

On the other hand, you have to report the Treasury each three months about your VAT generation (that is the difference between the VAT you produce in your invoices (It is a must for clients based in Spain, unless it is a culture-related/arts translation, which are exempt from VAT too) and the VAT you actually "pay" in you deductible invoices, which means that most of times you have to pay the Treasury every three months too). To this you can add the liability insurance, whose ammount also varies depending on the insurance company you choose (from 180 to 500 euros a year).

As Tomás said, you can deduct expenses related to work (Internet, phone, any purchases of dictionaries, software, etc...) Regarding fuel, you can also deduct fuel expenses if you have to travel for work issues, but you can only deduct the half of it and you must always ask for invoices.

And if your clientes are EU based, then you have to register in the ROI for intra communitary service providers. This has to do with VAT too, but I don't know how it works because I have never been in such situation...


In all, it is much more comfortable to get an advisor to be in charge of all the bureau-crazy. Oh, and you can deduct these expenses too


I hope to have been of any help...


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Inga Petkelyte  Identity Verified
Portugal
Local time: 19:53
Lithuanian to Portuguese
+ ...
Not easy? I'm just sooo jelaous... May 26, 2015

In the neighbouring Portugal, one is exempt from SS if not reaching the threshold of 2.500 euros a year. 9.000 is considered a fortune! That is, as an average yearly income of translators, according to a study, is 6.000 euros. Maybe slightly higher nowadays, the figure relates to 2011-2012.
And with a monthly income of 4.000, one would pay somewhat 744,.. euros to SS plus, of course, 25% IRS.
At the first glance in this light, Spain looks like heaven to me.


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Sheila Wilson  Identity Verified
Spain
Local time: 19:53
Member (2007)
English
+ ...
The 9,000€ limit is really a red herring May 26, 2015

Inga Petkelyte wrote:
In the neighbouring Portugal, one is exempt from SS if not reaching the threshold of 2.500 euros a year. 9.000 is considered a fortune! That is, as an average yearly income of translators, according to a study, is 6.000 euros. Maybe slightly higher nowadays, the figure relates to 2011-2012.
And with a monthly income of 4.000, one would pay somewhat 744,.. euros to SS plus, of course, 25% IRS.
At the first glance in this light, Spain looks like heaven to me.

I don't think the difference is as great as you think. As Cristina herself suspected, that 9,000€ without social security contributions is not really a valid option. It's quite clear (according to my asesor, anyway) that the income should be of an "occasional", "once-off", "non-repeated"... nature. So a bilingual person might be able to get an assignment to translate a book, and not pay SS on the income, but you couldn't be a professional translator on an annual basis and legally escape paying. Also, for all us expats at any rate, non-payment of SS means no state health cover, so you'd have to pay for private insurance out of the 9,000€ plus sort out pension and other contributions yourself. These links make things reasonably clear:
http://www.advoco.es/advice/26-autonomo-self-employed/77-autonomo-social-security.html
http://www.advoco.es/hot-topics/43-guide-to-spains-autonomo-system.html#A7

It seems that "most" autónomos pay the minimum contribution, but maybe those earning 4,000€ a month pay more - I don't know as I only work part time. And there are now massive short-term reductions for new autónomos. And income tax is around 20%.

My asesor didn't think liability insurance was obligatory, and none of those I researched covered working with clients outside of Spain. As I've currently reached the heady heights of 90€ income from two Spain-based clients, I haven't bothered with it.


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neilmac  Identity Verified
Spain
Local time: 20:53
Spanish to English
+ ...
Same here May 26, 2015

Sheila Wilson wrote:

My asesor didn't think liability insurance was obligatory, and none of those I researched covered working with clients outside of Spain. As I've currently reached the heady heights of 90€ income from two Spain-based clients, I haven't bothered with it.


I've never bothered with liability insurance either.
I'd also add that 4K a month seems a lot to me - it takes me all my time to earn around 3K, although my rates are comparatively low.


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