Working for yourself in Tenerife

Most people who come here have the dream of working for themselves, whether running a beach bar or setting up a business linked to something they’ve done, or are continuing to do, in the UK. Many also don’t realise that “jobs” here are often actually self-employed positions, which means that instead of an employment contract, they themselves have to register as “autónomo” and pay their own social security contributions and submit their own tax returns to account for the money they earn … which is often a “commission” on whatever they are selling rather than a salary as such.

This “autónomo” status is also how many people choose to work when running a business, rather than setting up a company, something that in Spain is far more onerous, and expensive, than it is in the UK. Most who do set up a formal company, however, will choose an SL, a sociedad de responsabilidad limitada, broadly similar to what we would understand as a Limited Company. Unlike the UK, however, an SL requires a minimum investment of €3,000, which then represents the full liability of any debts incurred by the company. An SL cannot be floated on the stock exchange, and so a different vehicle is needed for a public company. This is an SA, a sociedad anónima, and as in the UK, this is highly regulated and required to conduct annual audits: it also needs a minimum initial investment in the tens of thousands of Euros, and so is only really necessary for the most ambitious of projects.

Whichever path you choose, do ensure that you take advice from independent and qualified professionals – one of the following, and one who is unconnected with anyone from whom you are buying a business.

  • gestor – a general purpose administrator who deals with bureaucratic procedures (Tráfico, licences, etc) and who should have basic qualifications since the profession is regulated;
  • asesor – an adviser as well as an administrator, what we might easily call an “expert”, and will normally specialise in a particular area – e.g. an asesor fiscal, an asesor laboral, etc. Foreigners normally come across them in their asesor fiscal guise, where they might be most easily compared with a certified as opposed to a chartered accountant. An asesor has a higher level qualification than a gestor, and will also be registered since the profession is regulated. It is actually an offence for someone to call themselves an asesor if they are not, which puts them on a level with accountants and lawyers;
  • contador – a fully qualified accountant who is normally only needed if tax affairs are complex or international in nature;
  • abogado – a lawyer, who has all the legal and professional status and qualifications that one would expect a lawyer to have.

Any of the above will be able to advise you on the whole range of issues that you will face, whether opening licences, CIF numbers (“Certificado de Identificación Fiscal”, the tax ID number all companies must have), any particular legal or fiscal issues relating to the field in which you will be operating, and all tax office matters including submission of relevant tax returns and IGIC (essentially the Canarian equivalent of VAT). They will also be an important sounding board for your ideas, and help to formulate a business plan away from the optimistic views that any sales agents are bound to have of your ideas.

When it comes to business premises, bear in mind that if you aren’t buying a freehold property, your location is likely to involve what is known here as traspaso, or cesión. This is a leasehold purchase which will require you to buy the right to use the property and then pay rent on it on an ongoing basis.  The lease will normally be for a period of five years or so, with rent increases limited to the rate of inflation. They can often be renewed at the end of this period but tenants often find there is a significant increase in rent at that point. Needless to say, the preferred option for many new businesses or self-employed individuals is to find a property that is a simple rental rather than a lease, but the traspaso system is the norm here.

Finally, do check to see if your business plan is something that could be in line for a start-up grant. These can be available at various levels so you will need to check widely. Start with your local ayuntamiento, then the Cabildo, and then the Regional Canarian Government. There might even be grants available from the EU for those starting businesses within Spain. If your business is considered likely to create employment, or be of a type that is being promoted for a specific reason, your chances of eligibility will be much improved. Your business adviser will be able to help you research what grants you might be able to apply for, and inform you of any particular lines of credit that might be available as well.