If you’re earning over €70,000 as a freelancer in Spain, switching from autónomo to a Sociedad Limitada (SL) company could save you thousands. The numbers speak for themselves: you could keep an extra €14,000 for every €100,000 you make by taking advantage of corporate tax rates, dividend splits, and broader deductions.
The autónomo tax burden
As a self-employed person in Spain, your income is taxed progressively- from 19% up to 47%, depending on the region. On top of that, social security contributions are now calculated on actual income via 15 income bands. For example, if you make €100,000, you face ~45% IRPF plus roughly €10,000 in contributions, leaving you with just €69,000 net.
Why set up an SL
SLs have a flat 25% corporate tax rate (15% for the first two years). Income can be paid out as salary (deductible by the company) and dividends (taxed at 19–23%). Profits can also be reinvested within the company, delaying personal taxation until funds are distributed as dividends.
For example, if your SL earns €100,000 and you reinvest €20,000, you only pay the 25% corporate tax on €80,000. This means that whatever you don't need for day-to-day expenses stays within the company, tax-free until it's paid out as salary or dividends, reducing the total tax paid.
Who can open an SL
In Spain, you need a valid business justification to open an SL. This typically includes reasons like operating in a risky business area where liability protection is necessary, hiring employees, or having a clear commercial purpose. The authorities will expect a real business reason beyond simply optimizing for taxes.
Take-home income comparison
When incorporation makes sense
Switch to an SL if:
- You earn above €70,000/year
- You can reinvest profits or have high business costs
- You're planning to grow or hire
Under that threshold, the savings may not offset the setup and accounting costs.
Advantages of a Spanish company
1. Lower corporate tax rates
Companies in Spain pay a flat corporate tax rate of 25%. For smaller businesses, the first €120,000 of profit might even qualify for a reduced rate of 15% during the initial years.
2. Dividends and salary splits
With a company, you can pay yourself a combination of salary and dividends.
- Salary: Deducted as a business expense, reducing taxable corporate profits.
- Dividends: Taxed at lower rates (19%–23%), allowing you to withdraw profits efficiently.
This flexibility enables you to lower your overall tax burden significantly.
3. Reduced social security costs
As a company owner, you pay into the autónomo system only on the salary you declare, not on the full business income. This can result in significant savings compared to an autónomo paying contributions on all their income.
4. Earnings retention
A company can retain earnings to reinvest in growth or to defer taxes on profits, giving you greater financial flexibility. You can keep that money in the company, or invest it in stocks and apartments. Tax free.
How to open an SL
- Reserve the company name.
- Draft and notarize the bylaws.
- Get a CIF (tax ID).
- Open a company bank account and deposit €3,000 capital.
- Register for corporate taxes and social security.
Yes, it's more complex than going autónomo. But a good accountant makes it painless and unlocks the tax benefits.
The bottom line
Going autónomo is quick and easy. But it’s not the most tax-efficient route for many. An SL lets you pay lower taxes, slash social security bills, and reinvest more.
Want to see if you qualify? Talk with a specialist and compare your numbers before making the switch.
