Spain is bordered to the south and east by the Mediterranean Sea and shares land borders with Gibraltar, France, Andorra and Portugal. It is a full member of the European Union as well as being a member of the United Nations, NATO, OECD and WTO and is the second largest country in Western Europe, the fifth largest in Europe. Spain has the twelfth largest economy in the world and the fifth largest in Europe. It was ranked number ten in 2005 by the Economist Intelligence Unit’s survey for the quality of life and cost of living is reasonable and rent in particular is quite cheap.
Spain faired particularly well at the beginning of the global crisis as their main banks had diversified and had limited their exposure to housing mortgage risk. Banco Santander aided and took over distressed British banks so actually profited from the crisis.
Spain is a very popular country for European contractors especially those who specialise in the fields of Oil and Gas, Comms or banking. It offers plenty of sunshine, but also winter sports in the Northern Pyrenees for those who like diversity. It has a relaxed culture with plenty to offer.
EU citizens do not require a work permit to enter into employment in Spain with the exception of Romanians who require a work permit and a work contract before they can enter the country. However if you are intending to live in Spain then there are two things that you must do.
1. Get a Numero de Identification de Extranjeros, this is an NIE number. Spaniards have an identity number called a DNI and this is the equivalent. You will need this for all official purposes including opening a bank account. You merely need to present yourself at the town hall with the relevant paperwork. Your NI Certificate will take four to six weeks and you will need to go and pick this up.
2. Go onto the foreigners register. This is a requirement of anyone who is planning on spending more than ninety days in Spain. Once you have registered you will get a residency certificate. You can only stay in Spain for a maximum of 182 days in the year if you don’t have a resident’s permit.
Contractors from outside the EU including the US will possibly need a visa, they will also need a work permit and a residency card before they can start work. Please note that work permits will only be granted if it has been demonstrated that the job has been offered to EU nationals without success.
If you need to apply for a work permit then you need to produce the following ;
- Valid passport or travel document
- Three passport-size photographs
- Copy of the employment contract, stamped by the Foreigners’ Office
- Criminal record certificate showing that you have not broken any Spanish law in the last five years
- Health certificate confirming that you are not suffering from any contagious diseases
Getting to grips with the taxation system in a different country can be very daunting, but do not worry Chesterfield is here to assist.
Contractors can come under two different categories which are taxed quite differently. Employees or Self-Employed. Employees have an ‘earned income’ allowance on top of the personal allowance available in Spain whereas Self-Employed do not. Contractors that are moving to Spain get a full year’s tax allowance, but this means that they are also liable to Spanish tax on their worldwide income for the full year, unless they are taxed as non resident despite living in Spain, like in the case of ‘Guest workers’. ‘Guest Workers’ get to pay tax at a flat rate of 24% on their Spanish income and do not have to declare overseas income. The disadvantage to this is that they are not able to get the tax allowance. All tax payers with an income above a certain level do have to submit a tax return which is known as Declaration de la Renta. Please note that you are regarded as tax resident in Spain if you spend more than 183 days a year there or if your main business or professional activities are there.
Chesterfield offer a number of packages and schemes which will affect the income tax that you will have to pay. Examples of this are;
- Umbrella Company. This is where Chesterfield do all the invoicing and paperwork for you, you merely need to supply us with a timesheet every month and the rest is taken care of. – please see below for further details regarding our Umbrellas.
- Corporate Structure. This is where a company is established which will invoice the contract provider or agency for the contractors work done and then pay the contractor either by dividend or salary. – please see below for further details regarding our corporate structures
Income in Spain includes employment income, movable capital, business income, capital gains and inputted income. Please note that income tax rates are progressive in Spain and are calculated as follows;
- 24.75% on income up to €17,707.20
- 30% on income up to €33,007.20
- 40% on income up to €53,407.20
- 47% on income up to €120,000.20
- 49% on income up to €175,000.20
- 51% on income up to €300,000.20
- 52% on all income over €300,000.20
When working in Spain you must enrol with the General Social Security Fund. Social Security needs to be paid as soon as employment begins. In Spain both the employer and the employee pay a percentage of the contribution, the employer pays the larger contribution. The Social Security provides cover for the worker in the event of the following areas;
- Non work-related injuries
- Maternity and paternity leave
- Work-related injuries and occupational illness
- Wage Guarantee Fund
- Occupational Training
If you are self-employed then you are not covered for unemployment or industrial accidents as these are normally covered by your employer.
Normal social security rates on your total annual income would be 23.6% for the employer while the employee contributes 4.7%. If you are self-employed you either pay 28.3% or 26.5% if you do not want to contribute to temporary disability cover on income between €841.80 and €3,198 per month. If you are self-employed and over fifty you can opt to pay social security taxes on income of between €907.50 and €1,665.90 per month.
A person who has paid regular social security in another EU country before going to Spain may benefit from public health cover for a limited period of time, in order to do this you must obtain a S1 form and present this to the local social security office in Spain. Please note that if you hold a European Health Insurance Card it will not be valid for healthcare in Spain if you are classed as resident in Spain.
The amount of social security that you pay in Spain can be transferred to any other EU country or any country that has a treaty with Spain.
Spanish employment is highly regulated with the emphasis being on protection of the employee’s rights.
These regulations are not straight forward as depending on the job it comes under different categories and each category has a different set of regulations known collectively as the convenio colectivo. Generally they regulate matters such as salary, working hours and vacations. Employees have the right to fifteen days for marriage, two days for birth of a child or death of a family member, one day if moving home and four months for maternity. Working time in Spain should not exceed forty hours per week, you should not work more than nine hours a day and rest at least twelve hours between one working day and the next, however there are exceptions for certain industries. Employers must give at least fifteen days before terminating contracts. Within the EU salaries can be both partially or totally paid abroad. Temporary and agency workers are entitled to the same rights and benefits as permanent employees.
Spain has several large banks, among them Banco Santander and BBVA.
Banco Santander S.A is the largest bank in the Eurozone and is one of the largest banks in the world in terms of market capitalisation. It has a strong presence in the UK when in 2010 it bought out Abbey National, Alliance and Leicester and Bradford and Bingley all British banks that had roots going back to the early 1800’s. It is now the third largest bank in the UK in terms of deposits and the forth largest in terms of branches operated. It was rumoured that they would also be acquiring branches of the Royal Bank of Scotland and Natwest, but this never proceeded.
Although you may be contracting in Spain your salary does not necessarily have to be paid there. Chesterfield can assist with opening a bank account anywhere in Europe.
We have a number of different Umbrella companies to choose from depending on your own personal circumstances. The umbrella company essentially acts as an employer. There are various advantages to this including being able to offset certain expenses such as travel and meals. The umbrella company provides payroll services by billing the agency on behalf of the contractor and then distributing the salary back to the contractor.
Chesterfield are able to incorporate companies in a number of jurisdictions in order to suit your needs. It is more expensive to set up and maintain than our umbrella or self-employed schemes, but can have its advantages. For instance once the contract provider or agency has been invoiced for the work and this has been paid into the company bank account the contractor has a choice as to whether they would like to collect their money as dividends or as salary. If they were to choose dividends then in Spain dividends are taxed at 21% up to €6,000, 25% on amounts up to €24,000 and 27% on amounts higher than that so it can work out much cheaper than the income tax rates.
Chesterfield and contracting in Spain
Chesterfield has years of experience with contractors working in other countries and a variety of schemes and solutions in order to make life easier. You will be given a dedicated member of staff who is responsible for all your administration and contact, allowing them to be more in tune with all your needs and assist you in every way possible.
To learn more about Contracting in Spain follow the link below or call us on our offices
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Telephone Number: 44 20 7097 1385