Spain has a well-developed labor and tax system. For foreigners coming here to live, study, or work, choosing the right form of employment is a key decision. Some find an employer and sign a contract, others register as self-employed (autónomo), and some combine both approaches.

The path you choose affects not only your take-home pay, but also:

• your tax burden,
• social security benefits,
• ease of doing business,
• the possibility to renew or change your residence permit,
• and your future pension and benefits.

The two main options are:

• Cuenta ajena — working as an employee (through an employer)
• Cuenta propia (autónomo) — self-employment

These two regimes are fundamentally different, and understanding the distinctions can help you avoid costly mistakes.

Cuenta ajena (Employee)

Literally, cuenta ajena means “someone else’s account.” This is employment under a contract where your income is controlled by your employer.

Key Features

• Employment contract (contrato de trabajo)
• Employer withholds taxes and social security contributions
• Employee receives net salary after deductions
• Social benefits: paid vacation, sick leave, unemployment benefits, pension

Taxes and Contributions

1. Income tax (IRPF)
   • Progressive: 19%–47% depending on income and region
   • Withheld monthly by employer
2. Social Security (Seguridad Social)
   • Employee contribution ~6.35%
   • Employer adds ~30%

Example

Gross salary = €2,000

• IRPF (15%) ≈ €300
• Seguridad Social (6.35%) ≈ €127
• Net salary: €1,573

Employer pays an additional ~€600 in social security contributions.

Benefits and Deductions

Employees can claim tax deductions for children, dependents, or disability, and may get partial tax refunds when filing the annual tax return (Declaración de la Renta).

Pros:

• Simple: employer handles taxes
• Guaranteed social rights
• Stable income

Cons:

• Less flexibility
• Cannot directly deduct business expenses
• Tax burden depends on salary level and region

Cuenta propia (Autónomo / Self-employed / Freelance)

Cuenta propia or autónomo is self-employment. You work for yourself, find clients independently, and handle all taxes and contributions.

Key Features

• No employer; full responsibility lies with you
• Must register with Hacienda (tax office) and Seguridad Social
• Income declared independently; business expenses can be deducted
• Social benefits exist but are limited and depend on contributions

Taxes

1. Income Tax (IRPF)
   • Progressive scale (19–47%)
   • Filed quarterly via modelo 130
   • Taxable income can be reduced by deductible business expenses
2. VAT (IVA)
   • Usually 21%
   • If applicable, invoices include VAT; quarterly reporting via modelo 303
3. Social Security contributions (cuota de autónomo)
   • Income-based since 2023 (tramos system)
   • Minimum ≈ €230/month at low income
   • Can reach €500+ for higher income
   • Reduced rates available for first years

Example

Income = €2,000/month

• Cuota de autónomo: €230
• IRPF (19%) ≈ €323
• VAT: neutral if business expenses offset VAT charged
• Net income: ~€1,447

Deductible Expenses

Autónomos can deduct:

• Office/home rent (partial)
• Internet, phone, electricity
• Equipment, furniture, technology
• Transportation costs

This reduces taxable income and IRPF payments.

Pros:

• Flexibility: choose clients and schedule
• Tax optimization through expenses
• More freedom

Cons:

• Administrative work: accounting, quarterly declarations
• Mandatory monthly contributions, even with no income
• Fewer social benefits (vacation, sick pay, unemployment)

Tax Comparison

Income €1,000

• Cuenta ajena: ~€887 net

• Autónomo: ~€624 net

  Tip: At low income, employment is usually better.

Income €2,000

• Cuenta ajena: ~€1,573 net

• Autónomo: ~€1,357 net

  Tip: Employment still preferable at mid-level income.

Income €5,000

• Cuenta ajena: ~€3,182 net

• Autónomo: ~€3,150 net (may improve with expense deductions)

  Tip: High earners can benefit more from autónomo status if expenses are optimized.

Social Benefits

Cuenta ajena:

• Paid vacation (minimum 30 days/year)
• Sick leave partially covered by employer + Seguridad Social
• Unemployment benefits (paro)
• Full pension contributions

Cuenta propia:

• Vacation exists but unpaid
• Sick and maternity leave available after contributions
• Unemployment benefits (cese de actividad) harder to claim
• Pension depends on contributions and years paid

Pros and Cons for Foreigners

Cuenta ajena:

• Easier for work visa holders
• Stability for residence permit renewal
• Less bureaucracy

Cuenta propia:

• Ideal for digital nomads or entrepreneur visas
• Work with international clients
• Best for high-income specialists (IT, consulting)
• Requires careful tax management

Common Mistakes

1. “Autónomo is always better” — false; at low income, monthly quota can consume most earnings
2. “Employment is too heavily taxed” — taxes exist in both, but employment is automated
3. Ignoring quarterly filings → fines
4. Poor expense documentation → Hacienda may reject deductions

Conclusion

• Cuenta ajena: Stability, social benefits, low bureaucracy; best at low/mid income
• Cuenta propia: Freedom, flexible work, tax optimization; best for higher-income professionals, entrepreneurs, and digital nomads

The right choice depends on your income, goals, and visa type. For foreigners, it can affect not only taxes but also your future in Spain.