Going Legal After Years “in Black” – Risks? (From Spain)

[AloneInTheDark]

Hi everyone, I’d appreciate your help.
I’ve been working as a freelance designer since 2010 without ever registering officially in Spain. My income was low and irregular, so I never became self-employed. Paying 350€/month regardless of earnings felt impossible, especially with a disability that limits how much I can work.

Now I want to open an Etsy shop to sell my digital designs. That would mean declaring taxes and becoming self-employed. I’m ready to “go legal” because I believe in this idea.

But I worry: will becoming autónomo now trigger an investigation? I’ve received payments into my personal accounts (bank, PayPal, Wise) over the years, and never filed a tax return. Can Hacienda look into past income?

Right now I earn from several sources:

• Design work (inconsistent, mostly under 800€/month)
• Music royalties (under $500/mo although the 2 years I was sick with Covid I could not work and music royalties where much higher)
• Amazon KDP royalties (~$80/month, sometimes higher)
• I have had a couple of times a big income like $1000 from kdp or a client that paid me a whole year in one go $2000

I see two options:

1. Become autónomo (self-employed) in Spain
2. Register a small business abroad (like in the US) and combine earnings with my partner under a small audiovisual company

But either way, I’m scared that declaring income now could raise red flags. Like why am I/we already earning money as a new self-employed or small business. Has anyone gone through this? Any advice?

 

[laur.laurix]

The amounts are too small to raise any flags fiscal authorities in Spain, Italy, Romania etc are as useless as the hair on your ass....if you ask me don't declare anything until you start earning more than 10k / month.

Distribute your income in multiple bank accounts preferably ebanks and don't accept transfers more than 10k in one transfer.

 

[SirLouen]

But either way, I’m scared that declaring income now could raise red flags. Like why am I/we already earning money as a new self-employed or small business. Has anyone gone through this? Any advice?

The other way around.

The more time you don't inform the more risk of receiving the postal notice of death. If you have a disability you will have a couple BIG discounts (they can even go to 0 depending on your grade of disability, inform yourself).

Also nowadays, you can pay as low as 200 euro month if you list your income in the minimum. Generally you set you income based on a 3 month income average, after that you can keep updating every 3 months without troubles. When I talk about income it is what comes to your pocket discounting expenses.

Also you can open a company in Estonia and you can send yourself the money as foreign payments. Sole proprietors in Estonia don't pay taxes there, but when you send your income to Spain you will need to inform in the annual report as foreign income. It's only cheaper because you don't have to pay to the social security administration but it's going to be the same tax regarding the internal revenue administration.

 

[AloneInTheDark]

The amounts are too small to raise any flags fiscal authorities in Spain, Italy, Romania etc are as useless as the hair on your ass....if you ask me don't declare anything until you start earning more than 10k / month.

Distribute your income in multiple bank accounts preferably ebanks and don't accept transfers more than 10k in one transfer.

The amounts are too small to raise any flags fiscal authorities in Spain, Italy, Romania etc are as useless as the hair on your ass....if you ask me don't declare anything until you start earning more than 10k / month.

Distribute your income in multiple bank accounts preferably ebanks and don't accept transfers more than 10k in one transfer.

Hmm I see… The thing is, after reading Etsy’s TOCs, it looks like I’d need to be fully legal from the start to sell there. They ask for a NIF (which I think is my national ID), and they’re known to pause or close new shops for ID checks. If they ask for a VAT number bc they consider I had enough sales, and I don’t have one, my shop could get shut down.

Ideally, I’d prefer to start in black and only go legal if things go well. I don’t need to hit 10k, but if I made around 1.5k/month, I’d be fine registering. The issue is, Spain has no VAT threshold, so even from day one, technically I’d need to register. Etsy also reports EU sellers who offer custom digital products, even at low volumes (but they don’t mention instant downloads which will be what I’ll be selling)

Do you know more eBanks don’t report to Spain authorities? Atm I have Payoneer and Wise.

Also, I think with Etsy if I’m in Spain they will require an Spanish bank account (this is something I heard)

 

[AloneInTheDark]

The other way around.

The more time you don't inform the more risk of receiving the postal notice of death. If you have a disability you will have a couple BIG discounts (they can even go to 0 depending on your grade of disability, inform yourself).

Also nowadays, you can pay as low as 200 euro month if you list your income in the minimum. Generally you set you income based on a 3 month income average, after that you can keep updating every 3 months without troubles. When I talk about income it is what comes to your pocket discounting expenses.

Also you can open a company in Estonia and you can send yourself the money as foreign payments. Sole proprietors in Estonia don't pay taxes there, but when you send your income to Spain you will need to inform in the annual report as foreign income. It's only cheaper because you don't have to pay to the social security administration but it's going to be the same tax regarding the internal revenue administration.

I have a disability but haven’t filed for it. It takes years and it’s one of those invisible illnesses that I know are super difficult to get that. I have been in survival mode for decades with other things to worry about and have never applied for that bc at that time I sow I would not get real help even if I got the 30% (the max they give for my type of illness). I know that could come handy but just preparing my shop products is taking all the energy I have at the moment.

I didn’t know about that minimum, if you earn up to €670 you have to pay €200 which is better than €300. Plus an accountant approx €50. But imagine, I give it all and if I make that minimum I would be left with €420 not even enough to pay rent and expenses.

The company in Estonia is something I thought of about in the past but after reading deeper was like: if you are doing your work in Spain, Spanish authorities don’t care if the company is in Estonia they will want you to also become self-employed or file taxes in Spain or both.

But what worries me more is: do they investigate new self-employers and/or businesses backwards? Is there something I could do so they don’t see how messy my finances have been? The business could be in USA for example but won’t they check if I have had payments from the music distributor in the years prior?

 

[SirLouen]

But what worries me more is: do they investigate new self-employers and/or businesses backwards? Is there something I could do so they don’t see how messy my finances have been? The business could be in USA for example but won’t they check if I have had payments from the music distributor in the years prior?

Theoretically, banks report to them. Technically, all banks report to them and who knows how much information are they receiving. The amount of "pirates" in any EU country is countless with highest taxes in the world, so you can imagine, the number of alerts they might be receiving per day with a limited number of human resources to manage them.

This said, it feels that the hunt is pretty random. I always felt that it's better to play safe with their rules and then play within such rules, than just playing outside them. For example, doing a good accounting you could save a ton in VAT, that eventually will be paying the social security part. Personally, I'm saving easily +$1K in VAT every month, so for me paying $200-300 or even $500 in social security is peanuts. Yes, it is risky to go too aggressive on VAT filing, but as long as you have a good substantiation, you will be fine. An example: You buy a phone for $1K, with a VAT of 21% you are saving $200 straight. So basically, that month you have the Social Security "for free" because the phone was going to be bought anyway, right? Anyway, I understand that this kind of big purchases can be only eventual, but still, you will find out that many of the services you consume as an individual have VAT and can be VAT fillable, so maybe you will not be saving $1K, but at least $100 with ease.

The company in Estonia is something I thought of about in the past but after reading deeper was like: if you are doing your work in Spain, Spanish authorities don’t care if the company is in Estonia they will want you to also become self-employed or file taxes in Spain or both.

Yes, if you are selling goods with VAT, its useless to do a company in Estonia, UK or US because you need to do local invoices. The idea of doing such is in the case you are selling digital services mostly (99% of the business done in this forum, BTW)

I have a disability but haven’t filed for it. It takes years and it’s one of those invisible illnesses that I know are super difficult to get that. I have been in survival mode for decades with other things to worry about and have never applied for that bc at that time I sow I would not get real help even if I got the 30% (the max they give for my type of illness). I know that could come handy but just preparing my shop products is taking all the energy I have at the moment.

It's not that difficult as you think. Just go to your doctor to start the process. If its a mental issue, he will send you to the psychiatrist, the idea is to demonstrate that your issue is restricting you of performing at 100%. Most people think that this is an odyssey, but it's not that hard as you think. I used to volunteer for a mental health association, and many people there got it relatively easily.

 

[PixelPirate99]

I get the worry, it's a tough call. Maybe talk to a gestor first to get a handle on the potential back taxes before you jump in.

 

[DataPhreak]

Okay, so the big worry is past income catching up with you, right? Maybe talk to a gestor before you officially register; they've seen it all and can advise on the best way to approach it without waving any red flags.

 

[Crypto_Man]

Hey! Just signing up as a freelancer in spain doesn’t mean you’ll get audited. But if the tax office sees something unusual (like someone suddenly earning money after reporting nothing for years) they might look into it. They can see your bank or PayPal, but they usually only dig deeper if they notice big, unexplained amounts.

If your past income was low and random, they might not notice. Still, it’s smart to tell them voluntarily if you earned +€5k/year in the past. Doing this lowers any fines a lot. This doesn’t mean you can skip spanish taxes just because your income comes from another country. If you live in spain, they tax everything you earn, no matter where it’s from. Lots of freelancers eventually switch to regular jobs without problems. The tax office mostly goes after people who are clearly trying to hide income, not those who just make mistakes, so be open about your earnings, they’ll help you follow the rules and make the most of your situation.

 

[Family Agency & Media]

Your concerns are understandable. You should share your concerns with a law firm who will advise you.

 

[AloneInTheDark]

Okay, so the big worry is past income catching up with you, right? Maybe talk to a gestor before you officially register; they've seen it all and can advise on the best way to approach it without waving any red flags.

Yes that’s my biggest worry (if I decide to stick my head out) I’m glad to hear that they have heard it all as I was feeling a bit uneasy about telling a gestor this stuff. Do you happen to know which type of gestor is best for this?

 

[AloneInTheDark]

Your concerns are understandable. You should share your concerns with a law firm who will advise you.

Do you know which type of law firms I should look for?

 

[blackpay]

1. Become autónomo (self-employed) in Spain

This is the best option. Start paying taxes in Spain.

I’m scared that declaring income now could raise red flags.

The amount is small for the Revenue Agency in order to raise red flags. They interested in bigger fishes