How to avoid mistakes when registering as self-employed

6 Min read

The first decision, and the most important one, you’ve already made: being self-employed. Now follow this guide step by step to formalize your registration and avoid mistakes in the process.

Getting registered as self-employed may seem very complicated, but it’s not that difficult if you have the steps clear.

Before talking about the main mistakes you can make, let’s review the steps you need to take to register as self-employed.

To register as self-employed with Social Security, you must go to one of their offices and present form TA0521 or register online.

For this you will also need:

DNI, foreigner card or passport.
Social Security card.
Work permit for foreign workers.

By submitting this form, you will register in the Special Regime for Self-Employed Workers (RETA) and define:

Your contribution base.
The coverage for which you will contribute.

2. Register as self-employed with the Tax Agency

You must register with the Tax Agency using form 036 (Census declaration of registration, modification and deregistration in the Census of Entrepreneurs, Professionals and Withholding Agents) or form 037 (which is the same simplified form).

Both forms include:

Your personal data.
The details of the activity you will perform.
Your tax address.
Your tax obligations (the taxes to which your activity will be subject).

Most likely you can submit form 037 directly. Form 036 (more comprehensive) is only for self-employed workers in special VAT regimes.

NOTE: When you register with the Tax Agency, you will also register in the Economic Activities Tax (IAE), although you are likely exempt from paying it because you would need to invoice more than one million €/year.

3. Register with the Labor authority

Most likely you won’t have employees when you start your activity, but if that were the case, you must communicate the opening of a workplace in the competent authority in your Autonomous Community.

Additionally, you must register your workers with Social Security.

4. Register with the City Council

If to perform your activity as self-employed you are going to open a premises or establishment, you may need to process an opening license at the city council of the corresponding municipality.

If you also need to make significant renovations, you must also process the construction license.

The cost of the opening license is calculated based on the commercial relevance of the street, the type of activity you perform and the size of the premises you are going to open.

Registering as self-employed is easier than it seems.

8 mistakes self-employed workers make when registering

These are the most common mistakes that self-employed workers make when registering as self-employed. Take a look at them as it’s worth saving yourself these blunders ;)

1. Buying deductible material before registering with the Tax Agency

A classic, you get carried away by the excitement of the first day and start buying things frantically.

Without thinking that, to avoid problems when deducting VAT, it’s better to wait until you have processed the registration with the Tax Agency.

This way you’ll avoid the Tax Agency sanctioning you for skipping a formal administrative requirement. It would be a shame to start with a sanction.

Note: You can buy things and then deduct VAT, if you submit forms 036/037 to the Tax Agency and indicate that you are going to buy things before starting your activity.

Not all expenses are deductible, it depends on your activity. Only expenses derived from your profession are deductible.

Until recently it was advisable to register with the Tax Agency and then do the same with Social Security, but this has changed.

The most correct thing currently is to process your registration as self-employed with Social Security first and then register with the Tax Agency.

Keep in mind that you have to register with the Tax Agency within a maximum of 60 days from the day you registered with RETA (Special Regime for Self-Employed Workers) including the same day of your registration with the Tax Agency.

Note: It’s advisable to start your activity as self-employed and register with Social Security and the Tax Agency on the same day.

3. Not choosing the right epigraphs when registering as self-employed

When you register with the Tax Agency, you must select the epigraph or epigraphs of the IAE in which you will develop your professional activity, at no additional cost or limit.

It’s important to select the epigraphs of the IAE and CNAE that best fit your activity.

If the Tax Agency estimates that your real activity does not correspond to the epigraph in which you registered, you can have problems…

4. Not applying bonuses

The bonuses in the self-employed contribution, you have to request them when you register, NOT AFTER.

So review the options you have carefully and keep in mind that:

Requesting a bonus, in most cases, means losing the right to request any other in the future.
Depending on the characteristics of your activity, there are bonuses that may have a greater benefit for you.

NOTE: When you are officially a self-employed worker, you will no longer be able to request any bonus in the self-employed contribution.

5. Not capitalizing unemployment before registering as self-employed

The beginnings as self-employed are usually arduous and complicated. Capitalizing unemployment is a very valuable tool to be able to face the challenges of the first months as self-employed and you can’t let it slip away.

To be able to enjoy the lump sum payment of your unemployment benefit, you must request it before processing the registration as self-employed.

6. Not reflecting your home in the Tax Agency registration

If you work from home, it’s advisable to reflect the square meters of your home that you are going to dedicate to your professional activity.

If you do this, you’ll be able to deduct the percentage of VAT from your home expenses corresponding to the meters you have specified. Remember that the invoices must be in your name.

NOTE: Don’t miss this blog article with the expenses you can deduct if you work from home.

7. Making many intra-community purchases

If you make many intra-community purchases and/or sales, you might want to register in the Intra-community Operators Register (ROI) to avoid triggering some alarms at the Tax Agency.

The ROI is a specific VAT system to which purchase and sale operations of products and services between companies from different European countries are subject.

8. Contributing only for Common Contingencies

‌When registering with Social Security we have to choose the coverage for which we want to contribute. At the beginning, to save every last cent, we opt for contributing only for what is strictly mandatory, which is generally for Common Contingencies, without thinking that we are giving up the possibility of collecting unemployment for self-employed at some point, that the benefits to receive will be more limited…

Before jumping at the offers, think if it’s worth paying a little more to be covered against any possible contingency.

Thanks to the 2017 self-employed law, there is greater flexibility regarding changes in the contribution base and in registrations and deregistrations with Social Security.

Now self-employed workers:

Can process registration and deregistration as self-employed up to 3 times a year.
Can change their contribution base up to 4 times a year.
Monthly contributions are paid from the day of registration and stop being paid the day of deregistration, without having to pay the quota for the entire month.

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How to avoid mistakes when registering as self-employed