As a Chartered Accountant in Spain, working mainly with British and other foreign clients, questions about social security frequently crop up. They generally divide into two broad categories: is it a good idea to be â€śin the systemâ€ť and, if so, how do you join?
Pros and cons
Is it a good idea to join the Spanish social security system? Contracted employees have no choice: they are obliged to join the system and their employers will deduct contributions from their salaries. Pensioners who have retired to Spain have the right to free state healthcare, so they are effectively in the system. But what of those who are not in contracted employment, living off savings, working cash-in-hand or perhaps thinking of starting a business i.e. those that are, or potentially could be, self-employed?
For this group the benefits of joining the system must be weighed against contributions of more than 250â‚¬ a month and having to charge IVA (VAT) and pay income tax. Because some benefits like maternity and unemployment pay are restricted to employees, the self-employed really only benefit in two ways:
Healthcare for themselves and their families: If youâ€™re not in the system you will have to pay for medical attention including hospital stays, once temporary fixes like using your EHIC card (designed for tourists and short term visitors to Spain) have run out. Another option is to go private either buying insurance or paying out for care as the need arises. Paying as you go could prove financially crippling if a serious illness arises and even the cost of a few trips to private clinics can mount up. Itâ€™s possible to get private health insurance cover for a family for much less than social security contributions but you will need to check the exclusions and particularly the excesses applicable.
Pensions: the rules for expatriates, who have paid social security in both countries, are intricate but essentially anyone paying into the Spanish system for 15 years will get a half-pension in addition to the pension from rights they accrued in their home country. Â Contributions made in Spain for even short periods count can count towards your pension in the country where you retire (if within the EU).
Individual circumstances vary but for economically active residents aiming to stay in Spain for the foreseeable future it makes a lot of sense to join the system , particularly when you have a family. Apart from the benefits earned by being in the system there is the peace of mind that comes from being â€ślegitimateâ€ť. Besides, if you are self-employed, some customers prefer to deal only with registered businesses and accept proper invoices. On the downside the system does not seem very fair for the self-employed as compared to employees; for example the self-employed are not entitled to claim unemployment benefit.
Joining the social security system
Once you have decided to join the system:
- go to the local â€śTesoreria de la Seguridad Socialâ€ť (find the nearest by typing this phrase and your location into Google Maps) with your NIE and passport (plus copies). Ask for a â€śSolicitud de Afiliacion a la Seguridad Socialâ€ť form, complete it and you should get a social security number there and then.
- You will then need to register yourself with the Hacienda (Tax Office) as â€śautonomoâ€ť (self-employed). At this stage you will need to provide an address, social security number, NIE and to decide what category of autonomo your are (I am â€ścontableâ€ť = â€śaccountantâ€ť).
- You then have to return to the Social Security office to complete your application. Ask for and complete a â€śsolicitud de alta de autonomosâ€ť form. Among other things you will need to provide bank details for the contributions, declare the category of trade or profession you belong to and decide whether to opt for health and sickness cover (about 30â‚¬ more each month). Hand it in with a copy of your NIE and the proof that you have registered with the Hacienda (from the step above and called a â€śmodelo 36â€ť)
Once in the system you will be obliged to issue VAT invoices to clients and account for the VAT quarterly. In addition there are income tax payment and reporting obligations which can vary by trade or profession. If you donâ€™t wish to negotiate the bureaucracy alone Advoco will sign you up for your "autonomo" (registering as self-employed) and social security together for one fixed fee of 90â‚¬ We will also act as your tax representative handling the ongoing filing and submissions for income tax and VAT purposes.