Spanish social security - is it worth signing up?

 Anyone considering this question might like to take a look at an article I have just published on the subject.  It's to the point and aimed at sole traders / self-employed professionals (or thinking about it) living in Spain.

"In the system" - an introduction to social security

Full version is on the Advoco website

or type in Spanish Social Security to Google and you will see it near the top (surprisingly).

Am I right in thinking that Spanish social security contributions are a flat 250 euro pm for self employed rather a % of income? If you worked abroad  on contract for a foreign employer and are paid gross but are resident in Spain are you classed as self-employed?

Thanks,

Poppyseed

Poppyseed - I suppose it would depend on the terms of the contract? If your employer is not deducting any tax or social security in the country where you work, it sounds as though you are contracted on a self employed basis, in which case logically, since you have declared yourself resident in Spain you would have to pay tax and soc.security in Spain.

Bakeja - two questions:

1. Quote "...those that are, or potentially could be, self-employed.....For this group the benefits of joining the system must be weighed against contributions of almost 250€ a month and having to charge IVA (VAT) and pay income tax"  Surely from a purely legal point of view, there is no option? Is it right to suggest that one must weigh up the "pros & cons" of joining the system? Or am I missing something?

2. Quote "...On the downside the system does not seem very fair for the self-employed as compared to employees; for example the self-employed are not entitled to claim unemployment benefit." I have heard recently that this has changed. Do you know anything about a change in the situation?

Thanks Roberto. Have been looking at the Spanish tax rates too, they don't seem to compare well with the UK. All in all I think we would be financially worse of becoming resident in Spain especially with that rate of social security contributions.

I do know in the UK the self employed rate of NI contributions does not entitle you to unemployment benefit.

Regards, Poppyseed

It would probably depend then on how you split your time between UK / Spain; strictly speaking, if you spend more than 183 days a year in Spain you are resident here, and if you do spend most of your time here, you must consider the healthcare issue, i.e. if you do NOT contribute to the SS here, you will need private health cover since the EHIC will only cover emergencies. If on the other hand you split you time more or less evenly, you may decide it's better to remain officially resident in the UK - and pay non-res tax on your Spanish property. Either way, one or both governments are going to do their best to screw you!

 Roberto - Yes, if you run a business in Spain or practice your trade or profession you are obliged to get in the system and it isn't in any way optional.  I was trying to say, in as delicate a way as possible, that if you are working in the black economy there are some pros as well as cons for going legal.

Last time I asked my Spanish partner who knows much more about these things than I do, he said that the self-employed got more or less nothing if they became unemployed.  That was last year some time and I did read a thread about some kind of assistance being available now.  Sorry I haven't got the details.  If I get them, I'll post them.

Poppyseed - I have clients whose house and family are in Spain but go abroad regularly to work.  Some register as self-employed in Spain and invoice the overseas clients from here.  Some only work for one company (like a firm of consultants) and are employed by them in Spain even when the firm is foreign - the company registers here as employers and pay salaries using a payroll agency or accountants.  Others have companies in the place where they do their contracts (e.g. UK) and the company bills their clients and pays them a salary or dividends.  Finally some have offshore companies which bill their clients and pay them a salary and/or dividends.  

All these are legitimate structures but have very different tax implications.  All involve income being declared in Spain because once you are tax resident worldwide income is declared in Spain - but there are big variations to do with double taxation treaties, treatment of dividends, tax free allowances etc

The other point to note is that if you actually do some of your work in Spain (e.g. you travel to clients abroad but then write reports, offer advice etc back in Spain) then you have to set up shop here  e.g. being self-employed, employed or setting up an SL company.

We do not spend more than 183 days anywhere!!!! So we can designate which country to be resident for tax purposes. I had thought Spain would be more favourable but it doesn't appear to be. Really don't want to get into the realms of offshore companies etc. just looking for  a quiet life!

Thanks for your replies Roberto and bakeja.

"just looking for  a quiet life!"

Amen to that!

Hi

A question please

My wife is now needing to do something and has seen a little part time job that would suit her down to the ground, however the company has told her that she can't attend an interview unless she is registerd with the social security.

a) how does she register?

b) This job is not self employed, if she registers sucessfully and then does not get the job would she still have to pay contributions?

Thanks Steve

You should be able to go to the local “Tesoreria de la Seguridad Social” , complete a “Solicitud de Afiliacion” form and get a social security number.  This doesn't oblige you to start paying into the system and can lie dormant until you sign up a to a social security regime either when you become employed or self-employed.