Is it expensive to be a Sole Proprietor in Spain?

“How much does it cost to be a Sole Proprietor in Spain?”

This question is asked by everyone who wants to open their own business, and not work “for an uncle”. Is it really expensive or is everything made a mountain out of molehills?

Let’s find out.

All companies incur fixed and variable costs. Freelancers are no exception.
Fixed expenses include a quota that is taken out of pocket every month without reference to profit. Depending on the conditions, you can count on 3 types of bets:

1. Standard IP when you pay €283.30 without exception, subject to a minimum IP base of €1,000.
What does this mean? The minimum base is not how much you really get, but what rate you put yourself on for social insurance agencies. From this rate, a pension is then calculated, and various types of benefits: unemployment, temporary disability, etc.

2. Fixed fare or Tarifa plana, which is the most common in Spain. It provides for a system of discounts for 2 years of entrepreneurial activity:
— 1st year of operation — bonification of 80% of the base cost or 60 euros;
– from 13 to 18 months – 50% discount or 141.65 euros;
– from 19 to 24 months – 30% discount or 198.31 euros.
For women entrepreneurs under 35 years old and men under 30 years old, an additional bonus is also distributed after 2 years – 30% for the third year of activity as an individual entrepreneur.

To receive this tariff, one of the following conditions must be met:
– be registered for the first time as an individual entrepreneur;
– not listed as an individual entrepreneur for the last 2 years and 3 if they previously received these bonuses.

3. Freelance shareholder who is required to pay 364.23 euros per month. Why? Because the government decided to raise the minimum base of self-employed partner companies or those with more than 10 employees.

And here are the variable costs that you cannot avoid if you want to legally work in Spain: VAT (IVA) and Personal Income Tax (IPRF).

IVA or value added tax is most often 21% and is included in the price of the service or product when sold.
However, there are exceptions that are subject to a reduced percentage, or are not taxed at all:
– 10% applies to many food products, passenger transport, amateur sporting events, garden plants.
– 4% on essentials (bread, milk, cereals, cheeses), restaurant business, non-advertising books, magazines and newspapers, medicines, etc.
This tax is paid quarterly.

IPRF or Personal Income Tax
This type of tax, which is paid on a progressive scale, that is, the greater the profit, the higher the percentage of this tax.

There are other secondary costs that are important to think about in advance. For example, paying a third-party organization or specialist for bookkeeping, renting premises, vehicles, telephony and the Internet, hiring employees, and so on.

What do you think about these IP costs? Is it an expensive pleasure? Is it better to work for yourself or get hired?

Let us know what you think!

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