Emigrating to Mallorca - What you need to consider!
On television, the more or less successful stories of emigrants have become a standalone and quite successful format. However, these popular programs should be viewed more as cautionary tales than as reliable guides.
In principle, the two very important and decisive factors finances and foreign language skills determine the success of an emigration. Without sufficient availability of both, the likelihood of failure increases rapidly.
Even on Mallorca, which remains the most popular island for Germans to live and vacation on, there are some basic rules to follow. Despite a large German exile community living there, many emigrants have despaired of Spain's special characteristics for self-employed individuals and sooner or later quietly returned to northern climes.
Precisely Calculating the Use of Equity as an Expat
Freelancers and the self-employed are called "autónomos" in Spain. However, until the outbreak of the crisis and the economic collapse a few years ago, working entirely on one's own account was rather unusual and rare on the Iberian Peninsula. This has changed dramatically; today, even numerous Spaniards who previously held permanent positions are making a living as self-employed individuals in all sorts of fields and industries. Freelancers are therefore nothing unusual anymore, but fierce competition and low pay characterize the general job profile, even in the south. Anyone who can't capitalize on an inheritance or a lottery win to open a bar in the "Ballermann" (a popular holiday resort) or manage a restaurant in Puerto de Andratx should definitely have sufficient start-up capital for the first year. This should also be significantly higher than in Germany, where family, friends, and acquaintances can step in if necessary. With less than 20,000 euros and no personal income, you probably won't be able to make ends meet for a full 12 months in Mallorca.
The economy in Mallorca is largely dependent on the tourist season: During the winter months, income in the tourism services sector tends towards zero.
You won't find palaces for a few pesetas these days, either in Spain or in Mallorca.
Above all, the ongoing costs of living when emigrating to Mallorca should not be underestimated; rents and property prices on the island are sometimes even higher than in German cities. Especially in Palma or Cala Millor, as well as in other central and desirable locations, landlords are now demanding very high rents and are demanding quite a lot. Deposits and inventory takeovers ("Abstand") are also higher than in Spain. Unlike in Spain, rents for commercial properties are often paid a year in advance. Renovations to accommodation and the purchase of household appliances also quickly add up, with initial equipment easily costing five-figure sums. Incidentally, Spanish bureaucracy is only slightly less expensive than its German counterpart in terms of fees. Permits and certificates for businesses almost always incur a fee, and the often mandatory translation and certification of German documents for their official recognition is even more expensive.
Whether in Spain or Germany: From cradle to grave, forms, forms
Self-employed freelancers in Mallorca must be at least 18 years old to register their business; the business registration process is called "Alta en Impuestos sobre Actividades Económicas." After receiving this, the "autónomo" registers as self-employed with the so-called NIE (Número de Identidad Extranjero - Identification Number for Foreigners) at the local or regional tax office (Agencia Tributária or hacienda) and then receives the Spanish NIF (Número de identificación fiscal - Tax Identification Number). Taxes due are calculated either quarterly (estimación directa) or by estimate. Similar to the situation in Germany, income tax (IRPF) and value added tax (IVA) are payable. A widespread and preferred approach is the quarterly assessment of the amount and the calculation of the total tax by the tax office at the end of the year. This system (regimen a módulos) often brings pleasant surprises in the form of requested refunds.
Higher entry level for greater security and caution against Spain's tax inspectors
Registration with social security and the payment of monthly contributions are also mandatory in Spain, but the insured income can be freely chosen. If a higher income is declared, the monthly rate (cuota de autónomo) as well as the sickness benefit and pension entitlement also increase. As a rule, most freelancers declare a fictitious minimum salary of €850 per month, which currently results in a total of €254 for health, accident, and pension insurance. If you are unable to work due to illness, you receive 60% of your salary from the fourth day onwards; for €850, this amounts to €510. If the inability to work lasts longer than three weeks, you receive 75% of your declared basic salary. However, experts recommend insuring an income approximately twice this amount. For example, assuming earnings of €1,500, you'll have to factor in €450 in social security contributions, but the employer's liability insurance association (mutua laboral) will also pay a hefty €1,125 to the freelancer in the event of a prolonged illness. However, the illegal practice used by many freelancers in Mallorca of registering as self-employed low-income earners for only two months per year so they can invoice is strongly discouraged. The money saved on social security contributions this way is certainly not enough to cover the potential fines of up to €6,000 or more for this offense.