The importance of making the correct Autonomo classification

When registering as self employed with the Spanish tax office, the Agencia Tributaria, it is necessary to submit a modelo 36 (see our Spanish Tax Forms Explained guide).  Besides the usual personal data, the most important part is Part 4 (A) Actividad, where the new autonomo has to select the type or category of autonomo he or she is going to be.  This article looks at some of the considerations relating to this decision.  There are in fact two decisions to be made.

1. Description of self employed activity

In the box 400 descripcion de la actividad it is necessary to describe the nature of the proposed business or trade using the official IAE classifications.

For example if you are an IT professional you should probably put Programadores y Analistas Informatica and 763/2 (the IAE code for IT programmers and analists) in the next box 402.  There is some more information about activities and their codes in the Autonomo Guide.

Some the of the questions we get about this activity description -

Does it matter what you put?   If you have a vaguely defined business or offer a variety of services, it may not be so easy to pin down a single description.  There may two or three categories which could equallly apply.  In this case you should not worry over much about the precise category description and just select one that you think is most appropriate. 

Can I change category?  Yes.  If your activity changes you can submit another Modelo 36 deselecting the old category and nominating another.

Can I have two activities?  You can register for more than one completely different activity and you will only have to pay one lot of social security.

2.  Autonomo Profesional or Empresarial selection

Just as important as the selection of the business activity in box 402 is the decision as to whether to register as Profesional or as Empresarial (box 403 Tipo de Actividad).  This can have some very important tax considerations and should be considered carefully.

Essentially the distinction is between self-employed professionals and self-employed business people or traders.  Theoretically the distinction is between people who earn their living from their skills and qualifications and those that do so using physical stock, machinery or equipment.  Lawyers and doctors are professionals for example whereas shopkeepers or wholesalers are businesses.  It's obvious however that, in many cases, you could argue either way.  For example an accountant may say he trades off his professional qualifications but on the other hand he may have an office, computer systems and a website that constitute a business.  Although there are some professions that have no choice but to register as profesional (lawyers and doctors) and some businesses that do not involve specialist skills or qualifications which must register as empresarial (bars and shops for example), there are many that could register as either.

Why does it matter whether you are registered Autonomo Profesional or Empresarial ?  The tax authorities have separate tax rules for the different types of autonomo.  They should end up paying the same income tax in total but the timing will be quite different.  The reason for relates to retenciones, the amounts retained by the clients of autonomos on invoices due to be paid to them and instead paid over to the Agencia Tributaria.

Only profesional autonomos suffer such retenciones which work like a kind of advanced income tax on their earnings, like withholding taxes paid on interest or dividend earnings.  Even profesional autonomos only suffer retenciones on invoices paid by business clients.  The amount of retencion starts at 7% for newly registered autonomos rising to 15% after three years.

"Losing" 7-15% of your invoiced income sounds like unequivocally bad news and suggests that everyone should strive to be registered empresarial if at all possible.  They receive 100% of their invoice value from all customers whether businesses or the public.  However at the end of each quarter the tax situation levels out as all autonomos pay 20% income tax on their net autonomo income and profesionals can deduct the retenciones suffered from this bill.  IE both pay the same in the end.

However there may be a case for preferring to be classified as autonomo profesional.  This is because autonomos classified as profesional are exempt from quarterly tax declarations if they receive 70% or more of their income from invoices which include retenciones i.e. they receive the bulk of their income from other businesses/autonomos who deduct 7 or 15% and pay this to the Agencia Tributaria as tax on behalf of the autonomo.  In this situation the profesional autonomo saves the administrative burden of having to make quarterly tax returns and may pay less tax in advance that an empresarial autonomo (although that depends on the amount of allowable expenses they have).

For other articles about self-employment in Spain click on the ADVICE tab and select  Autonomo/Self employed from the drop down list.  For information about Advoco's autonomo service see here Services for Autonomos  or if you have any queries contact James Baker by email This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Related articles - Autonomo expenses guide   Spanish tax reporting deadlines and penalties