Contracting in Spain
Comprehensive contracting arrangements for Spain, a dynamic European market with a growing tech scene and strong business opportunities.
Contracting in Spain with City Traders
Official Language
Spanish (Castilian)
Major Business Cities
Madrid, Barcelona, Valencia, Seville
Currency
Euro (€)
Tax Year
January to December
Key Industries
Tourism, Technology, Automotive, Healthcare
Corporate Tax Rate
25%
Introduction
Spain, located on the Iberian Peninsula in southwestern Europe, is the fourth-largest economy in the eurozone and a member of the European Union. With a population of approximately 47 million, Spain offers a dynamic and diverse market with a rich cultural heritage.
The Spanish economy is service-oriented, with tourism being a significant contributor. However, in recent years, Spain has seen substantial growth in technology, renewable energy, and the digital economy. Major cities like Madrid and Barcelona have developed vibrant startup ecosystems, attracting international talent and investment.
From a contractor's perspective, Spain offers an attractive lifestyle with excellent quality of life, a favorable climate, affordable living costs compared to other Western European countries, and a well-developed infrastructure. The country provides good opportunities in sectors like IT, engineering, healthcare, finance, tourism, and creative industries.
While Spanish is the primary language, English proficiency is growing, particularly in larger cities and international companies. However, having at least basic Spanish skills is beneficial for navigating administrative procedures and daily life.
Registry/Registration
Before starting to work as a contractor in Spain, you need to obtain a NIE (Número de Identificación de Extranjero), which is a tax identification number for foreigners. This is required for virtually all official transactions, including opening a bank account and registering your business.
EU/EEA citizens can live and work in Spain under freedom of movement rules but must register with local authorities if staying for more than three months. Non-EU/EEA citizens require a residence permit, with several categories available depending on your circumstances, including self-employment visas for entrepreneurs and professionals.
Once you have your NIE and required residence documentation, the most common route for contractors is to register as an "autónomo" (self-employed individual). This involves:
- Registering with the tax authorities (AEAT) for the IAE (business tax)
- Registering with the Social Security system under the RETA regime (Special Regime for Self-Employed Workers)
- Setting up appropriate accounting systems to comply with tax reporting requirements
Alternatively, you might choose to set up a limited company (Sociedad Limitada or SL), which requires a minimum capital of €3,000, registration with the Mercantile Registry, and more complex administrative procedures.
Income Tax
Spain has a progressive personal income tax (IRPF) system, with rates varying by region. Tax is assessed on worldwide income for residents, while non-residents are taxed only on Spanish-source income.
Income Tax Brackets (2024, State rates):
| Annual Income (EUR) | Rate |
|---|---|
| Up to €12,450 | 19% |
| €12,451 - €20,200 | 24% |
| €20,201 - €35,200 | 30% |
| €35,201 - €60,000 | 37% |
| €60,001 - €300,000 | 45% |
| Above €300,000 | 47% |
Note: These are state tax rates. Autonomous communities may apply different rates, resulting in variations across regions.
As an autónomo, you must make quarterly tax declarations and payments (usually 20% of profits as an advance payment). The annual tax return is filed between April and June of the following year, reconciling quarterly payments with the final tax liability.
You can deduct business expenses that are necessary for your professional activity, properly documented, and proportional to your income. Common deductions include office expenses, professional services, business travel, and a percentage of home expenses if you work from home.
If operating through a limited company (SL), the company pays corporate tax at a rate of 25% on profits, and you'll pay personal income tax on any salary or dividends you draw from the company.
Social Security
Self-employed workers in Spain (autónomos) must contribute to the Special Regime for Self-Employed Workers (RETA). One notable aspect of the Spanish system is that the minimum monthly contribution is required regardless of your actual income, which can be a significant expense for contractors with variable or low earnings.
The monthly contribution rate is calculated as a percentage (approximately 30.6%) of a "base rate" that you can choose within certain limits. The minimum monthly contribution in 2024 is around €300, but this amount changes annually. New autónomos can benefit from discounted "flat rate" contributions for the first 12-24 months of operation.
These contributions provide comprehensive coverage including:
- Healthcare for you and your dependents
- Retirement pension
- Disability benefits
- Maternity/paternity benefits
- Sickness benefits (after a waiting period)
Recent reforms have introduced a new progressive system based on actual income, which is being phased in and will eventually replace the fixed contribution system.
Banking in Spain
Opening a bank account is essential for contractors in Spain, as it's required for handling client payments, paying taxes, and managing social security contributions. Major Spanish banks include Santander, BBVA, CaixaBank, and Sabadell, as well as digital banks like N26 and Revolut.
To open a business account, you'll typically need:
- NIE (Foreigner ID Number)
- Passport or ID card
- Proof of address (utility bill, rental contract)
- Proof of self-employed status (registration with RETA) or company documentation
- Initial deposit (varies by bank)
Spanish banks often charge monthly fees for business accounts, and some require minimum balances or regular deposits. Digital and online banks tend to offer more favorable terms but may provide more limited services. Consider factors like international transfer fees, online banking capabilities, and physical branch accessibility when choosing a bank.
For tax purposes, it's advisable to maintain separate accounts for business and personal transactions, which simplifies accounting and ensures clear documentation for deductible expenses.
Business Structures
Spain offers several business structures suitable for contractors, each with different implications for liability, taxation, and administrative requirements:
Autónomo (Self-employed)
The simplest structure with minimal setup costs but unlimited personal liability. Monthly social security contributions are required regardless of income, and you pay personal income tax on profits.
Sociedad Limitada (SL)
A limited liability company requiring €3,000 minimum capital. Offers better liability protection and potential tax advantages for higher earners but involves more complex administration and setup costs.
Sociedad Civil Particular (SCP)
A partnership structure between two or more professionals offering similar services. Partners have unlimited liability and are taxed individually on their share of profits.
Sociedad Limitada Nueva Empresa (SLNE)
A simplified version of the SL with faster formation process and certain tax advantages for new businesses. Maximum of five shareholders and certain naming restrictions apply.
For most contractors, especially those starting out or with moderate income levels, the autónomo status is the most practical option. Those with higher income levels, multiple clients, or specific liability concerns might benefit from establishing an SL. The choice depends on factors including expected turnover, number of clients, liability risks, and long-term business goals.
City Traders and Contracting in Spain
At City Traders, we support contractors throughout their Spanish business journey, helping you navigate the complexities of the Spanish administrative and tax environment with confidence.
Our bilingual team can help bridge the language gap that often presents a challenge for foreign contractors in Spain. We ensure all documentation is properly prepared and submitted, keeping you compliant with Spanish regulations while optimizing your tax position.
Whether you're just starting out as an autónomo or looking to establish a limited company in Spain, we provide tailored solutions that match your specific professional needs and circumstances.
Spain vs Other Contracting Markets
Compare key aspects of contracting in Spain with other popular European markets. See how Spain compares in terms of taxation, incorporation ease, and living costs.
Quick Contracting Markets Comparison
See how Spain compares to other popular contracting destinations
| Metric | Spain | United Kingdom | Germany | Netherlands |
|---|---|---|---|---|
Corporate Tax Rate Standard corporate tax rate for businesses | 25% | 25% | 15% + 5.5% solidarity | 15-25.8% |
Fast Company Setup Ability to establish a business entity quickly | ||||
Self-Employed Structure Availability of sole trader/self-employed status | ||||
Umbrella Company Option Availability of umbrella company services | ||||
VAT/Sales Tax Rate Standard VAT or sales tax rate | 21% | 20% | 19% | 21% |
English Business Environment Ease of doing business in English |
Data updated: April 2025
View full comparisonRequirements Checklist
- NIE (Foreigner ID Number)
- Residence permit (non-EU/EEA) or registration (EU/EEA citizens)
- Registration with AEAT (tax authority) for IAE (business tax)
- Registration as autónomo with Social Security (RETA)
- Business bank account
- VAT registration (if applicable)
- Professional insurance (based on your activity)
- Accounting records and invoicing system
Need Assistance?
Our Spain contracting experts can provide personalized guidance for your specific situation.
Get Expert AdviceFrequently Asked Questions
What is the autónomo system in Spain?
Autónomo is the status for self-employed individuals in Spain, similar to sole traders in other countries. Registering as an autónomo requires monthly social security contributions (around €300 minimum) regardless of income. These contributions provide access to healthcare and build up pension rights. The system has been simplified in recent years, particularly for new entrepreneurs who can benefit from discounted social security rates.
How is income tax calculated for self-employed individuals in Spain?
Self-employed individuals pay personal income tax (IRPF) on a progressive scale from 19% to 47% depending on income level and region. They must file quarterly tax returns and make advance payments, with a final annual declaration due in June of the following year. Various professional expenses can be deducted, reducing the taxable base. Special simplified tax regimes exist for certain professions and activities.
What are the requirements for obtaining an NIE in Spain?
The NIE (Número de Identificación de Extranjero) is essential for conducting business in Spain. To obtain it, you must apply at a Spanish police station or consulate with a valid passport, completed application form (EX-15), proof of purpose (e.g., work contract or business activity), and sometimes proof of address. EU citizens typically receive the NIE when registering their residence. The process can take several weeks, so it's advisable to apply well in advance.
What are the alternatives to working as an autónomo in Spain?
Alternatives include forming a limited company (SL), which offers liability protection but has higher setup costs and ongoing administrative requirements. Another option is working through an 'umbrella company' that handles administrative tasks while you focus on providing services. For certain professionals, forming a professional association (SCP) with other practitioners in the same field may also be an option.