Monday, March 1, 2010

Working Freelance in Spain - Updated and Expanded

Expatica ran an article at the end of last year on how to become autónomo or freelance in Spain and I couldn't help but start laughing at the line: "The procedure of going freelance is fuss-free as you can be registered as self-employed within one day." Have they actually ever done it? Leaving aside that fuss-free is not generally a term I'd use to describe the Spanish bureaucracy, the process of becoming freelance is particularly famous here for what a pain it is to do.

This is the cover for the form known as "Modelo 036." Actually, it's more like a book, spanning nine pages of small print written in Spanish legalese that leaves even native speakers confused and consulting a lawyer. Not only must you fill it out completely and legibly in blue, not black, ink, but you must also go to three different offices which are conveniently located on opposite sides of the city. Considering they all open at nine and close at 14.00 Mon - Fri, completing this task with one fell swoop would require the super human speed of the Flash and no lines which is about as likely to happen as snow in August.

As anyone who has had dealings with Spanish civil servants can tell you, dealing with a funcionario as their known is a test of patience of biblical proportions. Notorious for their mala leche (bad milk or surly mood) and the law of falta uno (one thing missing) your first visit will probably end in failure with you being sent home after waiting in a long line for some reason that makes no sense. The best advice I could give is to think of it as a way to practice zen and take at least two copies of every form you've collected during your stay here, a stuffed coin purse for any unexpected fees or copies, and still plan on coming home at least once during the process with your head shaking in frustration at the absurdity of the situation. 

The end result of this process is the social security department deducts either 280 a month or 840 a quarter from your bank account regardless of how much you earn and in return, you get access to the national health care system, some protection in case of a work place accident, and a reduced pension whenever the Spanish government finally decides on a retirement age. You don't, however, receive any unemployment benefits or paid vacation for those periods when there is no work or everyone is on holiday.  

So is it worth it? Given the fact that private medical insurance costs around seventy euros a month, maybe closer to a hundred with dental, objectively and economically speaking, probably not in all honesty. Not too long ago, the systems that monitored social security taxes (the ones you paid as an autónomo) and the income tax (deducted by the company that hired you) weren't connected, so you could get away with paying the latter while avoiding the former as you built up a client base. You face the risk of the Spanish authorities coming after you nowadays, especially since the arrival of the crisis, so it's best to do it despite it not making economic sense.

On the plus side, working freelance generally means you can charge higher rates than what  contracted worker would get and pay a flat 15% income tax. With the help of a good accountant, you can write off some purchases like meals and travel cards as business expenses, getting some money back at tax time. Best of all, you are the boss and have more control of your destiny and time table. One of the common complaints of contracted workers I hear is that they often have to work their specified hours, whether busy or not, and also sometimes more depending on the work load or if their boss feels like prolonging the day to avoid the screaming kids and ragged wife waiting for him at home.

On the negative side, many freelance friends of mine have commented on the difficulty getting clients to pay for services rendered.  This was always a problem in the best of economic times, but has become particularly noticeable and more frequent with the economic downturn. The judicial process for redress is complex and expensive it seems. Meanwhile, there 't aren't many credit agencies that will buy off debt and seek to collect. But I have to admit my knowledge on this subject is tangential so feel free to correct or expand in the comments section. Still, I think the more you can get upfront, the better off you'll be.

I recently read in the Spanish press that the government is looking to fix some of the flaws with the system like offering unemployment benefits. I hope so because more and more people I know are becoming freelance given the current job market whether they directly pitch their wares or go through an agency. Also, as I mentioned before, it's increasingly how companies are hiring in Barcelona since they avoid the social security taxes or severance pay that they would pay to a contracted worker. 

So basically, if you want to work legally in Spain and expand your chances of getting hired, you'll have to go through the autónomo process and pay the taxes, which is neither fuss-free nor economically beneficial. The good news is that once you've done it, you won't have to worry about the authorities looking for you and it's relatively easy as far as paper work goes to activate (alta) or deactivate (baja) your freelance status depending on finances. Hint, hint, nod, wink.

1 comment:

  1. interesting post. i'm trying to figure all of this out right now actually. making sense of the taxes has been giving me a headache, but i think that after 2 weeks i finally have made sense of it. i was wondering if you know of a resource for identifying what deductions you can take? i'm calculating a proposal for a job and, for example, would like to know if i can deduct bus fare for getting to and from work.