Self-employed or limited company in Spain? When each option pays off
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It is one of the questions we hear most. The answer depends on how much you earn, what you do with the profits and how risky your activity is.
Income tax or corporate tax
As an autónomo, your profit is taxed under personal income tax, with rates that rise as you earn more. A company pays corporate tax at a general 25 % rate, with reduced rates for new and small companies. When profits are high, a company usually pays less, but how you take the money out also matters.
When a company usually makes sense
- When profits are consistently high. As a rough guide, it starts to be worth considering above €40,000–60,000 a year, but every case is different
- When you want to keep profits in the business to reinvest
- When the activity carries risks and you want to protect your personal assets
- When there are several partners or large clients who prefer to contract with a company
Extra costs of a company
Setting it up involves notary and registry fees, and afterwards full accounts, corporate tax and annual accounts every year. If you work in and control the company, you will usually still pay self-employed contributions as a director.
Frequently asked questions
Can I move from self-employed to a company without stopping my activity?
Yes. The company is set up, the activity is transferred to it and then you deregister as self-employed.
Do I have to stay registered as self-employed if I set up an SL?
Usually yes, if you work in the company and control it, for example by holding at least half of the capital, or a quarter if you are a director.