Starting out as self-employed involves two mandatory administrative registrations, plus several decisions that are best made with proper information rather than on the fly. This guide summarizes the basic process without getting into the specifics of any particular activity.
The two mandatory registrations
- Tax registration with the Tax Agency (Form 036 or 037): this declares the start of your economic activity, the corresponding Economic Activities Tax (IAE) code, and your applicable VAT and income tax regime.
- Registration with the Special Regime for Self-Employed Workers (RETA), under Social Security: this creates your obligation to make contributions and your right to the associated benefits (healthcare, future pension, cessation-of-activity benefit if you contribute for it).
The order matters: you normally register with the Tax Agency first and then register with Social Security, within the established deadlines.
Choosing the right IAE activity code
The activity code you declare determines, among other things, the VAT rate that applies to your activity and whether your invoices are subject to income tax withholding (if you work for other businesses) or not (if you invoice directly to end consumers). A poorly chosen activity code can create tax problems down the line, so if in doubt it's worth checking with an accountant before registering.
Tax decisions you make from day one
- Income tax regime: direct estimation (normal or simplified) is the usual regime for most self-employed workers, taxing you based on your actual income minus deductible expenses.
- VAT regime: the general regime applies in most cases, except for specific activities subject to special regimes (such as the equivalence surcharge for certain retailers).
The contribution base you choose shapes your future benefits
Since 2023, self-employed workers contribute based on their estimated actual net income, within a table of brackets that sets the corresponding contribution base and, therefore, the monthly amount to pay. Choosing a contribution base that matches your actual income avoids both overpaying and facing a later adjustment if your actual income for the year doesn't match your initial estimate.
Don't forget the flat-rate discount
Most new self-employed workers are entitled to a reduced contribution (popularly known as the "flat rate") during the first months of activity, as long as they haven't been registered as self-employed within a recent prior period. It's worth confirming that it's applied correctly from your very first payment.
Start tracking your VAT from day one
From your very first invoice, every transaction with VAT charged or paid will form part of your quarterly return. Our VAT calculator helps you quickly check the breakdown of the taxable base and VAT amount on any invoice you issue or receive.