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View Full Version : Advice wanted We need advice about social security costs and taxes for setting up our new business



discreet lady
30-07-2013, 14:09
can some body please advise us on the following,imagine we have brought a leasehold for 20000 euros,the rent is 1000 euros per month,on top of this we have been told there is a 27percent tax payable do we have to pay this every month,if yes can we claim any back at the end of the year,thankyou, the next question is when and if we do decide to run a English tea room in Tenerife,do we have to pay social security every month by law,or can we take out a private health care to cover illness,dentist,hospitals etc etc ,please if anybody can give us as much info as possible we would be very gratefull,and you will get a free sandwich when we do open lol Debbie and gary:yum:

poker
30-07-2013, 14:19
You will need to inscribe as autonomo .
This costs about 300 euro a month .
Youre healthinsurance is included in this .
Use the seartch on the forum for autonomo and you will find all information here .

golf birdie
30-07-2013, 14:22
1st things first, I would never lay out any money on a lease. If I could not find a local for a rent only agreement I would walk away.

2nd, you need to seek professional advice before even looking for a local. What you pay now you will save in bucket fulls later.

CIM
30-07-2013, 17:11
Same as above - if you are paying a lump sum for a lease these days you are being ripped off.
Rent a local - pay 2 months deposit and a months rent upfront. No requirement at all to pay 20,000€ - you are basically throwing your money away if you do that and the owner will be laughing all the way to the bank.

casabonny
30-07-2013, 17:42
There is far more involved than you think.Assuming there are two of you working self employed ( autonomo it's called here) you would have to pay social on both people of 250 plus each person a month.You would then have an accountant to pay to do your accounts even if you use the Modelo system, tax is normally payable every three months and adjusted at the year end.On top of that you would have to pay basura( rubbish) , rent, advertising,insurance , opening license etc...
I think you really should look into this a lot more before taking the plunge as it is so much more difficult here to start up a business from scratch, we have done this three times now and believe me it's no picnic in the park!
Not having lived in the UK for some considerable time I am not up to date with things like this there but as I understand it in the UK you get your premises, equip it and off you go.That is not the case here.

slodgedad
30-07-2013, 20:33
Do we have to pay social security every month by law,or can we take out a private health care to cover illness,dentist,hospitals etc etc ,please if anybody can give us as much info as possible we would be very gratefull,and you will get a free sandwich when we do open lol Debbie and gary:yum:
I think you are mistaking Social Security with health care.

It is compulsary, as in the UK. Private health care is an additional option.

In other words you must pay for public health care whether you use it or not.

doreen
30-07-2013, 21:38
can some body please advise us on the following,imagine we have brought a leasehold for 20000 euros,the rent is 1000 euros per month,on top of this we have been told there is a 27percent tax payable do we have to pay this every month,if yes can we claim any back at the end of the year,thankyou, the next question is when and if we do decide to run a English tea room in Tenerife,do we have to pay social security every month by law,or can we take out a private health care to cover illness,dentist,hospitals etc etc ,please if anybody can give us as much info as possible we would be very gratefull,and you will get a free sandwich when we do open lol Debbie and gary:yum:

This 27% - I wonder if that was in fact a reference to "retention" tax i.e. the money you hold back from your rent to your landlord, and you then have to pay it over each quarter (by 20 April for Jan-Mar etc) ... it used to be 19%, now is 21% and many Spanish have a habit of saying the rent is x plus retention, whereas the correct way of looking at it is to consider the gross as your rent - in this case 1,210 each month.

As others have pointed out, paying to take over a business can be costly and sometimes unnecessary ... that 20,000 you were quoted will be hidden as purchasing some equipment, rather than a leasehold. Many leases have a clause that, if someone new takes over the lease, the landlord has the right to increase the rent by 20% - you need someone well versed in all this to check any paperwork for you before you hand over any deposit. You will find out (eventually) that there are very few successful businesses for sale (despite whatever blurb the agent has written on their website).

Getting an Opening Licence for a catering business is complicated ... so, yes, making a payment for a business that has an existent transferrable licence can be worthwhile. Often the real reason for a sale, apart from lack of profits, is because the Town Hall are imposing some stringent requirements and threatening to close the business if these are not met .... install a disabled toilet if over 50 patrons, get a new filter systems (I know of one small business doing minimal food & with a 2 ring electric burner that have been told to get in a new Filtronic system costing 3,000 euros!!), stop using the back area as a store (not in original application) etc etc ...

When investigating a property/business, you will need an Adviser ("Gestor") to go to the Town Hall on your behalf to check the file and see what letters have been sent out regarding the licence application - this application can indeed be transferred to you (for a fee) but all the problems/conditions are also laid on your shoulders :( If the business has a licence that can be transferred to you, one of the benefits is that you will (often, not always) not be bound by the latest regulations that the Town Hall bring in (often differing by Municipality and strictness of enforcement often differing too).

Starting afresh to apply for an Opening Licence, you will need to submit a "Project" - can cost 1,500 - 2,000 euros to get new drawings and correct report on electrics and paying the application fee etc

Your tax on the business will likely be by "Modulo" (often called Table Tax) ... i.e. you are charged a tax on the basis of how many tables you have on the premises (yes, really) and also a factor of how many staff/people working - this can be very advantageous at times as once the tax is fixed, it is what you pay per quarter and can be quite low ... the downside is also that it is fixed, for in quiet times you also pay the same amount. You will have to make IGIC returns quarterly too (IGIC being the Canarian equivalent of VAT - before you were exempt for your first year, but no longer)

Anyone working on the premises handling food will need a Hygiene Cert issued by Sanidad (Health/Safety Department) - that includes those serving the food.

Should you have someone in as Washer Up for a few hours, the temptation is to pay cash, but if the Work Inspectors turn up and you are found to have someone working without a contract, the fine is 6,000 euros ! And, maybe if you have jealous neighbours in a similar business, they (that is the Work Inspectors) or the Local Police, might just turn up in your first week on a "Denucia", complaint/report - (I have experience of that happening twice :( ) You have to keep certain paperwork available at all times in view in a locked glass fronted box and Police can inspect this at any time and issue fines if not complete or up to date (no Opening Licence, no Insurance Certificate etc)

So as Casabonny states, there really is a lot more involved that anyone who has not set up a business here would possibly think ...

chocaholic
30-07-2013, 22:19
You would be better off going to a casino and putting the 20,000 on black or red rather than put it into a tea room or any other cafe business here to be bled dry by the so called spanish system!
Old saying how do you become a millionaire in Tenerife, arrive with two million!!!

9PLUS
30-07-2013, 22:28
1st things first, I would never lay out any money on a lease. If I could not find a local for a rent only agreement I would walk away.

2nd, you need to seek professional advice before even looking for a local. What you pay now you will save in bucket fulls later.


Same as above - if you are paying a lump sum for a lease these days you are being ripped off.
Rent a local - pay 2 months deposit and a months rent upfront. No requirement at all to pay 20,000€ - you are basically throwing your money away if you do that and the owner will be laughing all the way to the bank.



Originally the Trespaso was for the machinery the bar/rest may have then got used as an everyday footfall which now isn't as reliable as it used to be. Paying €20,000 for a Trespaso on an up to date bar/rest could save a hell of a lot of headache and be a great business deal. You have to weight up the in's & out's.

discreet lady
31-07-2013, 16:51
wow thankyou very much we have taken that on board bigtime,even when we was out there in march with the agents we was not told a lot of what you have said,all we noticed was that people wanted our money asap,the one thing is we are not gullable,once again a big big thankyou Debbie and gary

YOUNG GOLFER
31-07-2013, 20:37
wow thankyou very much we have taken that on board bigtime,even when we was out there in march with the agents we was not told a lot of what you have said,all we noticed was that people wanted our money asap,the one thing is we are not gullable,once again a big big thankyou Debbie and gary

Look you don't have to rush into anything take your time and keep asking questions to members like Doreen, CIM, Casabonny and many others who know what it takes to start up a business here in Tenerife.
Don't part with any money to any Agent or person until you know exactly what you are letting yourself in for.

Tenerife is a great place and there is room for a good business to succeed and I hope it works out for you both it just takes a lot of ground work and planing for it to work.

Good luck.

slodgedad
01-08-2013, 02:18
In my 19 years in Tenerife I can't remember the amount of times I have seen bags of cash changing hands to buy something that doesn't LEGALLY exist, even though it is apparently trading.

Would you ever buy something in the UK without involvind lawyers, searches and legalities?

I know you seem to realize this but would be amazed at how many just look at a price, look at the customers and part with their money,

In the old days illegal businesses made a lot of money gambling they wouldn't be caught (One I worked in, as self empoyed, lasted 12 years before the police put the tapes up)

They made a lot of money but to do it these days you have to be prepared to be closed the same week you open.

Take stock of all the advice given so far.

Good luck. Hope you achieve your plan.