Registering as Self-Employed: Calculating the Cost

The first question that comes to anybody contemplating setting up their own business is, “how much is this

The first question that comes to anybody contemplating setting up their own business is, “how much is this going to cost me” so don’t let your enthusiasm take over; before you march down to your nearest Social Security office to register as self-employed, consider what it really means to run your own business and the on-going costs involved.

A major part of going solo is that you will be responsible for the monthly payment of your national insurance contribution from the moment in which you register. In the UK a self-employed person may only be liable to pay in the region of £50 per month; however as most of you are aware, national insurance contributions in Spain are quite a bit dearer than many other countries.

Each year the government releases applicable rates to calculate your contribution and for 2013 it is as follows:

Minimum rate: 858,60€
Maximum rate: 3.425,70€
% including temporary medical leave: 29,80%
% excluding temporary medical leave: 26,50%

What does all this mean? Aside from entitling you to health care if you weren’t eligible before, basically your monthly contribution depends on the above rates. The rate is your “salary” in a manner of speaking but it also contemplates including an additional amount on top to cover you for illness. You must also choose a “mutua” (health insurance company) to handle your paperwork in the event you claim for medical leave but don’t worry, you do not have to pay extra for this service, rightly so, it is including within your contribution. Let’s work on the premise of somebody who wishes to register as self-employed on the minimum rate and wants to include the supplement for temporary medical leave:

29,80% of 858,60€ = 255,86€ monthly contribution

CALCULATE SOLE TRADER COSTSBefore you establish your rate, think realistically about how much you expect to earn from your business and your personal circumstances because the amount you pay each month directly affects how much you will be entitled to if you were unable to work due to ill health as well as what you will receive upon retirement age so the minimum rate is not necessarily the best way to go when you think long and hard about it. In Spain, you can only take out from the system what you have put in so if you contribute on the minimum rate, your pension will be calculated in the same way.

There are exceptions though, always welcome news if they apply to you. Please find two such examples below:







Men under 30

Women under 35

STANDARD: 30 months relief paying a reduced rate with approximately 30% off the normal monthly contribution


NEW IN 2013: Flat rate of only 50€/ month (in practice, approximately 74,70€) during 6 months.


–       As long as you haven’t been registered as self-employed during the previous 5 years


–       As long as you do not hire employees



Those with registered disabilities




Please consult with an advisor as reductions are dependent on your individual circumstances



As mentioned, you are liable to pay this amount from the day in which you register, however all payments are taken at the end of each month by direct debit to your bank account so if you register on the 25th of the month, you will still be charged the complete month so it only makes sense to register towards the beginning of the month if circumstances permit. Payment is due even if you haven’t earned much that month, if you went on holiday or if you were off sick so it is an obligation that shouldn’t be taken lightly as penalties and charges are incurred for non or delayed payment.

Of course, the monthly contribution is only one of the obligations of a self-employed person. There are other important matters to consider such as taxes and in Spain there are two very different tax systems that will determine your tax obligations throughout the year so it is important to get it right from day one but we’ll talk about that next time.

About Sabrina L. Williams

Although I was born in the UK, I moved to the Canary Islands, Spain at a young age and I haven't looked back. The Canaries is a fantastic place to live, I mean you can do all types of outdoor activities practically all year round because of the great weather. Horses are my poison but the islands are also a superb spot for water sports so they do attract a lot of attention from people around the world. Anyway, enough about that. Back in 2011, I made one of the biggest, scariest yet best decisions I'd ever made and set-up my own business in the middle of a recession. I love what I do as no two days are the same, plus Spanish law keeps me on my toes as it is constantly changing (often without warning!) so there is always something new to learn. As I've branched out in the world of Administrative Consultancy, I decided to create a blog to discuss topics of interest to others in my industry and my clients, share tips and experiences, to see what new ideas people have for improving their businesses and the like so I hope you'll find the time to join me on this venture...

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