We live in a very different time than we did thirty years ago. At that time practically no one could consider setting up a business if they were working full time, but today and thanks to the Internet it is feasible to have a side project that generates income.
Income can come from generating content (newsletter, YouTube…), selling digital products (books, courses…), physical products (Etsy, Amazon…) or even providing a service through a website (SaaS ). Be that as it may, whenever there is income, it must be legally regularized and we talked about this with Remo, a partner at iAsesoria and former editor of El Blog Salmón.
It is very fashionable, especially among programmers, to create a "side project", that is, something like a personal project with which to earn money in addition to the main job. Is there any specific figure to be able to carry out these complementary jobs while working as an employee?
Yes, the figure is to be autonomous. There is no other way to receive this income in Spain without forcing IRPF or Social Security regulations.
Whenever we talk about doing an economic activity, we have to differentiate between two different obligations, which are normally confused by many people. On the one hand, we have the obligation to register with the Treasury from the moment we begin to exercise an economic activity and on the other hand, we have (or not) the obligation to contribute to Social Security for carrying out economic activities.
Regarding the registration in the Treasury for carrying out economic activities, the fiscal rule is exhaustive and there is no interpretation doubt: from the moment an economic activity begins, we are obliged to register in the Treasury as entrepreneurs, to identify the activity that we do, if it is provided in a certain physical location or not and we have to frame the type of activity and tax obligations that it entails from the first minute.
Regarding Social Security, the general obligation to contribute to the self-employed arises simultaneously with registration, so reading the legal standard as it is defined right now requires that the registration with the Treasury and the high in Social Security.
We have the interpretive mess in article 305 of the Social Security Law. Quoting verbatim and in bold what is of interest:
“Individuals over eighteen years of age who habitually, personally, directly, on their own account and outside the scope of management and organization of another person, an economic or professional activity for profit (…)”
Here the concept of habituality appears, which is a concept that, applied to an economic activity, is not legally defined. Is it usual to schedule 4 hours a month? Is it common to sell online courses with an automated download system where owner interaction is minimal?
As can already be inferred, determining what is habitual or not is left to the discretion of the Administration and to the means of proof that we, the long-suffering taxpayers who are affected by this obligation, can provide.
This definition of habituality was already legally urged in DA 4 of Law 6/2017 on Self-Employment, but we are on the way to 5 years of the publication of said Law and in Parliament they have more important things to legislate, so which seems, as far as we go for now, subject to a judge's decision.
Isn't there a criterion that establishes how much you have to start contributing? It is recurrent to hear about the SMI
However, in all cases, it has been resolved by judicial means, so the casuistry based on a person who does not register as self-employed in Social Security and if in the Treasury to receive extra income, is that they will have to sue Social Security directly, because for Social Security itself, habituality is not regulated and it is up to the Courts to agree with the taxpayer.
And what happens if you are already registered with Social Security as an employee?
Being registered with Social Security as an employee, as I have anticipated before, can serve as a means of proof to demonstrate that our income from that side project is not usual. If that contract is combined with low income, we may have arguments to refute the obligation to register with Social Security, but be careful, because if they review our registration, we will almost certainly end up in a lawsuit (or paying the self-employed fees that ask us clearly if we want to avoid the legal mess)
What fixed expenses does being self-employed entail? And what procedures with the administration must be done on a regular basis?
Initially, the monthly recurring fixed expense is the amount of the Social Security contribution for the self-employed regime. Currently, if more than three years have elapsed since the last withdrawal from self-employment, we will be entitled to a bonus of 80% during the first 12 months of registration, paying approximately 70 euros per month.
With regard to the administration, depending on our specific activity, we will have to comply with those quarterly and annual tax obligations that each activity has associated with the presentation of VAT, IRPF, intra-community operations or sales of services or products electronically.
Do I have to do something special if sales are made outside of Spain?
Yes, it must be clearly differentiated whether we sell products or services, but it is necessary to process an inscription in the European Single Window if our sales exceed 10,000 euros per year with a certain country or request the intra-community VAT number if our clients are companies with headquarters in the European Economic Area.
How is the income of a side project declared?
In principle, we must define a little more what this side project is (software, digital download…).
In most cases, they are digital services (or software in SaaS) that are considered to be the provision of services.
What could the administration do to promote these side projects, which help create wealth?
Clarify the regulations of habituality, mark a clear criterion of registration obligations in the Treasury and Self-Employed for these activities and allow these income to be declared on rent up to an average threshold that could be from 10,000 to 15,000 euros/year, trying to greatly simplify all the bureaucracy associated.
In summary. simplification and regulatory clarity, given that as the Law is right now and the associated bureaucracy, it is preferable to do nothing than to complicate our lives for low incomes.