Another one bites the dust. . .

23 June 2008 One Comment

June saw more small business closures in Spain, as a drop in tourism revenue, poor performance of the pound against the euro and spiraling fuel costs made it impossible for some businesses to keep going.

While these factors are largely outside of the control of the Spanish government, other factors are not, and it is maddening to see normally successful businesses forced to cease trading altogether because there is a lack of support to help them ride out this slow period in the economy.

When I started The Wedding Guide of Spain, I was determined to do it by the book. To register, to pay tax, to file my paperwork, to get my licenses, and to contribute to the country that I was living in. After only six months of paying out hundreds each month regardless of earnings, I was dissapointed to have to make the decision to return the business to being UK based.

By Spanish law, all autonomous (self employed) people must pay social security of around 260 euros per month. They must also file quarterly taxes with an accountant, who can levy fees of anywhere from 60 – 100 euros per month. On top of that, of course, you have income tax of between 25 and 35% of profits. Take into account all of the normal bills associated with running a business, and that is a lot of cash outgoing each month, before you even start trading.

While there is EU and government funding available to start ups, it is primarily available through financial institutions such as banks, who tend to apply their normal regulations for lending, such as a minimum of 1 year history of regular deposits and no use of overdrafts or other credit, making it practically impossible for a start up company to gain access to funds until they don’t need them.

Small business owners are faced with the difficult choice of closing their business in Spain, or trading illegally. It seems obtuse for the Spanish government not to realise that by offering some kind of tax relief or temporary suspension or reduction of social security payments, that small businesses could continue to trade, and contribute to the recovery of the local and national economy.