Self-Employed or Company? Which Legal Structure Is Best When Starting a Business in Spain

Starting a business in Spain requires choosing the right legal structure. One of the most common questions is whether to register as self-employed (autónomo in Spain) or set up a limited company (Sociedad Limitada – SL).

Each option has different tax, accounting and legal implications. Below, we explain the key aspects you need to understand to operate legally in Spain and avoid penalties.

1. Basic Tax Obligations for Self-Employed in Spain

All self-employed individuals in Spain must comply with the following obligations:

Personal Income Tax (IRPF)

Self-employed individuals pay tax on their profit (income minus deductible expenses). The tax rate depends on the applicable IRPF regime.

VAT in Spain (IVA)

Depending on the activity, clients and location, you may need to submit quarterly and annual VAT returns. Some activities are exempt or subject to special regimes.

Social Security Contributions

Following recent reforms, contributions are calculated based on actual declared income. Rates are updated annually.

Mandatory Accounting Records

Depending on the tax regime, you must keep records of:

• Income
• Expenses
• Investment assets
• Issued and received invoices

2. Income Tax Regimes for Self-Employed in Spain

A) Simplified Direct Estimation (Most Common)

Applicable if annual turnover is below €600,000.

Tax is based on real profit (income minus expenses).

Requirements:

• Income ledger
• Expense ledger
• Investment assets ledger

Suitable for professionals, small businesses, hospitality and general services.

B) Standard Direct Estimation

Mandatory if turnover exceeds €600,000.

Requires full accounting, similar to a company structure.

C) Objective Estimation (Modules System)

A voluntary regime available for certain activities.

Tax is not based on actual profit, but on predefined indicators such as:

• Business premises size
• Electricity consumption
• Number of employees
• Number of tables (hospitality)
• Vehicle capacity (transport sector)

This results in a fixed or semi-fixed tax amount.

Typical activities under this system include:

• Bars and cafés
• Retail shops
• Small transport businesses
• Taxis
• Hairdressers
• Small workshops
• Agricultural activities

Requirements:

• Annual income below €250,000
• Purchases below €250,000
• Activity included in official regulations
• No prior renunciation
• Not applicable to certain professions (lawyers, consultants, architects, etc.)

Changing regime:
Self-employed individuals can switch to the modules system in December if requirements are met.

3. VAT in Spain: When It Applies

When VAT is NOT applied:

• Services to EU companies (reverse charge mechanism)
• Services to non-EU private individuals
• Residential property rentals
• Exempt activities (healthcare, regulated education, insurance, etc.)

VAT regimes:

• General VAT regime (most activities)
• Simplified VAT regime (linked to modules)
• Retail surcharge regime
• Special regime for agriculture, livestock and fishing

Each regime involves different reporting and accounting obligations.

4. Setting Up a Company in Spain (SL)

In some cases, forming a limited company in Spain (Sociedad Limitada) is more advantageous.

Corporate Tax (Impuesto sobre Sociedades)

• Reduced rate: 15% for the first profitable years
• Standard rate: 25%

VAT

Same rules as for self-employed individuals.

Personal Taxation of the Shareholder/Director

Depends on how income is received:

• Salary as director or employee
• Professional invoicing
• Dividends

Additional Obligations for Companies

• Full accounting under Spanish accounting standards
• Annual accounts filed with the Commercial Registry
• More complex tax and administrative requirements

A company structure is usually recommended for:

• High-income activities
• Businesses with employees
• Companies reinvesting profits
• Self-employed individuals with high IRPF rates

5. Self-Employed vs Company in Spain: Key Differences

Tax Comparison Table: Self-Employed vs Company in Spain (2025)

Self-Employed – Direct Estimation

• IRPF (business income)
• VAT (if applicable)
• Social Security
• Simplified accounting
• IRPF rates: approx. 19%–47%
• VAT: 21% standard, reduced rates 10% or 4%

Self-Employed – Modules System + Simplified VAT

• Fixed IRPF based on modules
• Simplified VAT quota
• Social Security
• Limited to eligible activities and thresholds

Self-Employed – Special VAT Regimes

• Agriculture, livestock, fishing
• Retail surcharge
• Other specific regimes

Company (SL) – Corporate Tax

• Tax on company profits
• VAT (if applicable)
• Full accounting obligations
• Corporate tax: 25% (15% reduced rate for new companies)

Company – Dividends and Salaries

• Taxed under personal income tax (IRPF)
• Based on salary, dividends or professional income

Professional Advice When Starting a Business in Spain

Choosing between self-employed or company in Spain depends on your income level, business model and long-term goals.

Getting professional advice ensures:

• The right structure from the beginning
• Tax optimisation
• Compliance with Spanish regulations

If you are planning to start a business in Spain, we can help you choose the most efficient structure and manage all tax and legal obligations.