Tuesday, March 30, 2010

Social Security exemption for autonomos

A lot of people living in Spain and thinking of starting their own business are put off going self employed by the high fixed social security contributions. Anyone registering as “autonomo” with the Tax Office is also obliged to sign up for self-employed social security which costs a minimum of €250 a month. If you are starting a small business with uncertain revenues or if it is only a minor concern where you know the income is going to be pretty minimal this is very offputting.

The situation is worse when you do not need the social security because, for example, your family has private health insurance or you do not need to make any more state pensions contributions (e.g. because you paid the maximum already in the UK).

There is a possible exemption which may make a small business viable in this position. If your are registered autonomo but this is not a full time regular income generating occupation then you can be exempt from joining autonomo social security (known as “RETA” or Regimen Especial Trabajadores Autonomo ). The law does not give a hard and fast definition of how an “occasional” autonomo should be classified but case law has suggested that, in the absence of any other factors, earning less than the annual minimum wage would suffice.

The minimum wage, or the “salario minimo” or “salario minimo interprofesional” (“SMI”), is €7,599.60 for 2010. It is most commonly referred to as a monthly amount ( currently 633,30), and is changed annually by the Bank of Spain.

Once someone earns more than this monthly amount they won’t be able to claim the exemption from social security. It should also be noted that they won’t be able to claim any benefits or benefits from social security while they are not making payments.

More information can be found at the new Autonomo page of the Advoco website which also includes a video guide to the autonomo.

Friday, March 26, 2010

Interest rates: low does not always mean better

There is something about low interest rates. That they are a "good thing" is deeply ingrained into the psyche. To homeowners they promise cheaper mortgages and higher house prices and to businesses cheaper borrowing and more cash in their customers' pockets. Politicians look to low interest rates as a general economic cure-all.

Indeed a few years back when Labour was trying to persuade Britain that the Euro was a good idea, the main argument was that joining would keep interest rates low. The Conservatives today are arguing for a tough approach to the public sector deficit partly because they say that will keep interest rates down.

But are low interest rates such a great thing? If the government suddenly decreed that it was illegal to charge any interest would that be a good thing? No because it would take away the incentive to save and lend money to people who want to borrow. After all, interest rates are a pricing mechanism designed to balance the plans of savers and borrowers, consumers and investors. Surely what we really need is "correct" interest rates that ensure enough money is saved to finance investment in the economy.

Living in Spain I can visibly see the effects of an extended periods of low interest rates just by looking out of the window. Spain had the low interest rates that Tony Blair tried to sell the Euro using and it stoked a huge boom on the back of consumer and corporate borrowing. Now we see the stalled building projects, shutdown shops and businesses and unsold property that resulted. Spain shows no sign of recovering.

I know a lot of people will say raising interest rates now would be a recipe for "double dip", a slide back into recession particularly if public spending is cut and tax raised at the same time. All I am saying is that let's rebuild the economies of Spain and Britain on sound principles this time. Instead of trying to stoke demand via dollops of public spending, massaging down interest rates and house price booms, let's try and improve the supply side: the workforce, productivity, competitiveness. Meanwhile allow interest rates to settle at a rate that rewards savings to fund investment and stops people taking on debt they can't afford.

My latest column at the Alrroya website covers this topic in more detail Time to Raise Interest Rates

Tuesday, March 23, 2010

In praise of Norway

I have a great deal of admiration for Norway (even if I have rather childishly chosen a picture of the "Norwegian Blue" parrot to illustrate this post) mainly because of how they have handled their economy. Just like Britain, Norway has been blessed with huge oil and gas reserves to exploit in the North Sea and this industry has made it a very rich country.

The main plank of their economic policy (apart from to keep a million miles away from the Euro and the EU) is to invest much of the oil and gas money into a national fund to underwrite the country's future prosperity and specifically pensions.

This fund has grown to close on half a trillion dollars in value ($457 000 ooo ooo at the end of 2009) and is invested in bonds and shares all over the world including Spain. In fact the Norwegians have shown surprising faith in Spain investing about €18 billion in companies like Telefonica, Santander, BBVA, Iberdola and Repsol. It may be a sign of the times and show a lack of faith in the Spanish government's ability to manage its own finances, but the fund has very little invested in Spanish government bonds.

It's interesting, and quite depressing if you are British, to contrast the positions of Norway and the UK which also had a North Sea windfall:

Economy - Norway's is strong. GDP per head the 3rd highest in the world and fell only slightly during the recession. Britain's ... er, isn't

Public Finances - Contrast Norway's consistent surpluses with the UK's near bankruptcy

Trade - UK has chronic balance of payment difficulties, Norway exports twice what it imports.

Pensions - Norway's national pension fund contrasts with the destruction of the UK's private pensions and unfunded (most likely unaffordable) commitments to pay state and public sector ones.

Energy - Britain's North Sea production is in decline and we are closing power stations with no clear plan of how the lights are going to be kept on. Norway has used hydropower for its internal energy needs and invested heavily in energy efficiency.

You get the picture. It's like chalk and cheese and successive British governments are to blame with the current one being the worst of the lot when it comes to all of these issues. Let's hope come this May that it is dead, deceased, ceased to be, expired etc etc

Wednesday, March 17, 2010

Is the English Premier League in trouble?

With Wayne Rooney in world class form, an exciting title chase unfurling and plenty of action and controversy on and off the pitch, it is clear that the Premier League has lost none of its power to enthral. But what about its financial position? Now that Portsmouth has gone into administration, will more clubs go the same way? And what's got Liverpool and Manchester United so upset with their owners?

I chose this topic for my latest column at Dubai business portal Alrroya.com and called it "Football in Recession".

Actually my rather undramatic conclusion was that most clubs will be OK if they take action now to reduce their wage bills. Of the big clubs, Liverpool have the most to worry about though Man United might struggle to compete for top players with their huge annual interest rate bill (good news for everyone else particularly their wealthy neighbours Man City). My main suggestion was that clubs should have to ask permission from the FA before taking on additional debt and this should only be granted if the debt is affordable and in the interests of the club.

On another more local note there is a Fashion Show hosted by Spectrum FM in Fuengirola on April 8th. One of the Advoco associates, Sally Wadsworth, is organising it and here is what she has to say about it:

A fabulous evening not to be missed! Our first official VIP event, now to be held in Fuengirola at the beautiful location of Suave Cafe.
Come and see some beautiful clothes, casual and evening wear being presented in four different fashion shows, including a childrens' show.
Enjoy Cava and Hors d'Ĺ“uvres while listening to live music by the excellent singer Joost Jong!
Our special guest Chrissie from Spectrum FM Radio will be presenting the fashion show, with beautiful clothes from Damaris, Las Divas, Mi Perla and Viggo. Make up and hair styling from David Glen Hairdressers. To round off the evening purchase some beautiful accessories from Kooljewels!

For more information check out the Facebook page for the event: http://www.facebook.com/event.php?eid=371897511285

Monday, March 15, 2010

Spanish Driving Licence - new medical rules

In my previous post on the subject of Spanish driving licences (here) I referred to an apparent tightening of the rules when you swap a UK licence for a Spanish one - you have to produce a medical certificate, in Malaga at least, when you didn't have to before.

In fact everyone resident in Spain should have a medical before driving regardless of whether they use a UK or Spanish licence.

Now there are more changes to the rules on Medicals and for once they look like they are good ones.

The frequency with which you need to get a medical has been changed to:

Every 10 years (up to 65 years old)

Every 5 years (over 65)

Also you can renew your licence at the medical centre. Previously you had to take your certificate and old licence to DGT (Trafico) and make the change there. Now all the approved centres (called centros de reconocimiento de conductores or CRCs) are being linked up to the central trafico computer system. They will store the certificate information and you make your renewal application at the same time as you have the medical. You still have to provide new photos of course so that everyone can see just how much you have aged.

To find a CRC use google maps e.g. "centros de reconocimiento de conductores Estepona" or look here:

The full rule changes are here:

Advoco's driving licence renewal service is here:

Wednesday, March 10, 2010

Big Oil’s big Future

Once again I managed to get an article published (together with dodgy mugshot) on the Dubai business portal Alrroya.com. The full text of the article is here Big Oil's big future but in essence it is a piece for investors advising that the common view of oil companies as lumbering dinosaurs headed for extinction is misplaced. They are actually well-placed for a future in which the "easy" sources of oil are drying up. They are already struggling to replace the reserves they use up pumping oil to their refineries to meet current demand and this trend is set to worsen but the gloom is overdone. For one thing they are increasingly not oil companies as they get more involved in gas production which will be increasingly important as an energy source (even if it is a drag on profits right now). Secondly the search for new sources of oil plays to their strengths in some ways. Thirdly there is a technical argument that earnings will become more consistent when easy oil runs short (because prices will be permanently high and investors need not worry about the vulnerability of the companies expensive oil projects to a price bust). Finally the oil companies will get into renewables when the time is right and be big players in whatever new form of energy system replaces the current hydrocarbon dominated one. The pros outweigh the cons in my view and they are good investments for the long term.

Any way the article arose from my keen interest in energy and environmental issues which I see as both a huge challenge to mankind (certainly the rich lifestyles of the rich world) but also a great investment opportunity for those prepared to think long term. Thanks to anyone who has clicked on my articles in the past few weeks (the others were on the gold price and global warming data scandals). But for now back to my day job and preparation for the Spanish income tax season. New article on tax http://www.ehow.com/how_5945557_work-do-spanish-tax-return.html

Sunday, March 7, 2010

Does anyone still say thank you?

This is going to make me sound like a right crusty old bore, but has saying "thank you" gone out of fashion? I am thinking specifically of online social etiquette here but I am really struggling to deal with the rudeness I encounter on a daily basis.

If you went into a shop to ask directions and someone took a couple of minutes to help you out, would you (a) say something like "thanks, much appreciated" and be on your way (b) listen until you have the information you need, turn on your heels without a word and leave the shop? I'm guessing (a), but now think of an equivalent online situation. What if you made an enquiry by email and got a satisfactory response (from a human)? Would you reply with a quick word of thanks?

At Advoco we offer a free tax query service and as such get a lot of enquiries of this kind -requests for information, legal and tax clarifications that sort of thing. From my experience only about 1/10 enquirers replies unless it is for additional free information. Very very few reply with a simple "thanks for that" type note even when it is obvious the reply has taken a while to put together and is just the sort of info they were after.

For myself I must be pretty old school or something because I would never fail to thank someone for answering a query online. There are maybe times when it is an obviously commercial situation and thanks are not required EG when you have asked an online merchant for a quote or clarified something about a product or when you are an existing customer of say a bank and have contacted their call centre. But generally when I have received a personal response from someone who has given me what I asked for I will thank them. It doesn't really matter to me from a business point of view - the free queries are still a good marketing tool - but I find it an affront when I know I have provided some really useful info and am greeted by e-silence. Perhaps I am just a crusty old bore.

Tuesday, March 2, 2010

Why Spanish Income Tax is not as bad as it sounds

If you move to Spain from abroad it's probably for the weather, the lifestyle or for the opportunity to start again. Almost certainly not to get up close and personal with the Spanish tax system. But it's almost unavoidable: if you live in Spain you almost certainly will have to declare your income to the Tax Office and pay your tax here. There are exceptions and this guide will help clarify things:

So if you are like most of us and have to declare Spanish taxes then is it going to hurt? Well it depends on how much you earn of course but there are some reasons to be cheerful:


Us foreigners have a few exemptions we may be able to call on. For example there is a 60,000€ tax free allowance for income earned and taxed abroad and another exemption for new arrivals who want to be taxed as non-residents. See details here.

Crown pensions (those paid by the government to for example civil servants, army, police) are exempt from Spanish tax and don't have to be declared.


You get personal allowances where no tax is payable in Spain as you do in the UK. The allowances for 2009 are:

Everyone €5.151 (€6.069 for over 65s and €6.273 for over 75s)

Disability allowance - up to €6.900

1st child €1.836 2nd child €2.036 3rd child €3.636 4th child €4.182 (plus maternity allowance of €2.244 for children under three)

Earnings related allowance - €4.080 for earnings up to €9.180 reducing to €2.652 for earnings above €13.260.

(pensions count as earned income for this purpose)


  • * Credit is given for all tax deducted at source whether this be in Spain (e.g. “retenciones” deducted by banks on interest or employers on salaries) or abroad, if there is a tax treaty in force.
  • * Any payments into the Social Security system are deductible.
  • * There are important deductions allowable in the calculation of rental income – for residents but not non residents – and capital gains on property sales.
  • * Homeowners can deduct 15% of their mortgage costs (subject to limits)
  • * Pension contributions are tax deductible (subject to limits)
  • * The first €1.500 of dividend income is tax exempt.
  • * As a crisis measure the government introduced a €400 tax credit for all employees and self-employed persons in 2009. This is to be abolished from 2010.
If you want to learn how you can make your Spanish tax filing as painless as possible please come and talk to Advoco. If you like send me a private email at jb@advoco.es

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