If you decide to move to Spain, one of the first things you will need to do is to regularise your position as a worker or retired person.
If you’ll be employed by a Spanish company, you have no problems. They will do everything for you.
If you want to start offering your own services, such as teaching yoga or teaching English, or even buying and selling goods and services online, you will most likely need to become a self-employed person (autonomo in Spanish).
Another option is to open a company, however this is more complicated and only makes sense if you earn more than €60,000 per year. If that is the case, then you should look into this option as you will also end up paying less tax that way.
There are two other cases that I’d like to mention.
If you are a professional stock trader or operate in the markets in any way as your main activity, you don’t need to register as a self-employed person. You will simply declare your profits and losses in your annual tax return and pay the corresponding tax (currently ranging between 19 and 23%). Many people have doubts about whether they need to register as self-employed persons if they are doing such activity, but the reality is that you don’t have to, unless you are also managing other people’s money and not just your own.
Another common case is that of entrepreneurs and investors moving to Spain in search of living a better life. Typically they would own one or more companies and have been working for several years building these companies back in their home countries. They then decide that they would like to slow down and put in a management team to run the business while they move with their families to Spain to enjoy the Spanish quality of life.
You will find many Scandinavians, Russians, Germans and British entrepreneurs and investors in this situation living along the Spanish coasts from Barcelona all the way down to Marbella.
This is an interesting situation vis-a-vis the Spanish tax system and many have doubts about it.
The simple answer is the following:
If you’re a company owner and you decided to retire and not work at all while in Spain, then you don’t need to register as a self-employed person. You will simply declare any dividends or income from sales of your assets every year and that’s it.
On the other hand, if you still provide some consultancy services to your management team from time to time, or receive remuneration from other parties (typically hour-based consultancy or speaking at conferences), then you would need to register as a self-employed person and issue invoices to your company and third parties that way. Every year, you will now declare the dividends you receive from your company plus the income you generated through being self-employed.
Note that these two categories of income are taxed in different ways. General income is taxed on a scale that goes up to 52% in some autonomous regions like Catalunya, while the savings tax rate under which dividends would fall under is capped at 23%. You can read more about the Spanish tax system here.
Social Security – Public Healthcare and Pensions
Spain has quite a decent public health system, and to be able to make use of that you will need to be paying social security contributions. The same applies if you want to receive a state pension in your sixties (if that will still exist). So in practice what most entrepreneurs and investors do if they want to get access to these two state services is to register as self-employed and charge their own companies abroad a consultancy fee every month.
Disclaimer: I’m not a legal expert or tax advisor and the above should not be taken as legal advice. Contact me if you want me to help you find a tax lawyer or accountant to help you with any of the setups I described above and I’ll be glad to put you in touch with the people I trust.