Over the past few days, there has been more movement regarding financial aid for sole traders and business owners. Social Security confirms that on Friday 17th April 2020, 919.173 self-employed persons received payment in what is the first outlay of benefits that amounted to approximately 670,9 million euros. On 15th April, the record shows that 1.016.670 business owners have applied for this financial aid, so there are more payments on the way in case you have not received yours yet, but congratulations to all those who have, it must feel like winning the Golden Ticket from a Wonka Bar!

One very important detail that I noticed when I received the first notification that a client’s application had been approved was that it only confirmed payment of 661,08 euros. The Central Government stated in Royal Decree-Law 8/2020, 17th March that they would pay 70% of the base rate that determines how much Social Security we pay each month, so this amount coincides with that, however, the Canarian Government said it would pay the remaining 30% to all residents of this region. The minimum base rate is 944,40 euros, so where is the missing 283,32 euros?

While I have been reading through legislation and corrections on a daily basis from the Central Government, perhaps I have not been monitoring Canarian legislation quite as closely, but to be fair, they have been pretty quiet about financial measures since announcing they would pay the balance and nothing has been reported on the news either. Also, we (other professionals and I) thought that since the Mutuas have been charged with processing Sole Trader Unemployment Benefits, this would be automatically included once they approved the application, but this has not been the case, so I’ve been investigating the matter further.

The Canarian Government published a decree that has almost gone unnoticed (you’ll find out why in a minute), Decree-Law 4/2020, 2nd April and Article 3 confirms that 11 million euros has been made available to business owners who qualify. Upon reading the decree, the following stood out to me in particular:

1. Financial Aid will cover the missing 30% of the minimum base rate. What is my query here? Well, not everybody pays the minimum rate; some business owners contribute at a higher rate, so I’m not sure if they will be paid as per their contributions or whether it will be limited to the minimum.

2. The decree refers to this financial aid as a “grant” or “subsidy”, terms that are often used to help get new businesses off the ground, but these are not necessarily “free” if you can see what I’m getting at. The Central Government uses the expression “Social Security Benefit”, so it will be interesting to see whether any strings are attached to receiving this payment or not, but it is feasible that it will be done exactly at the President of the Canarian Government announced and I am overthinking the terminology that has been used as in Spanish there are other variations of the word “grant”.

I have contacted the Canarian Government to verify the procedure to obtaining the missing 30% since it has not been automatically added to the payments received. The response I have received so far confirms that although the Decree was authorized, additional steps such as how to apply for this financial aid, conditions etc have not yet been approved, but the Canarian Government hopes to publish terms and procedure next week (not guaranteed). I am still awaiting a response with regards to my concerns, but I imagine we will have to wait until a new decree is published to find out so watch this space.

For those whose application has been accepted, you are exempt from paying Social Security contributions until the State of Emergency comes to an end. However, the Administration still has the right to verify that you qualify for these benefits, so they may require additional paperwork to confirm, but to date, 97,3% of all applications have been approved without incident.

There is still one very important issue to discuss… what about Social Security contributions that were charged on the 31st March? Social Security did not implement measures prior to this date, which meant that everyone was charged a full month’s contribution, even who have had to close doors since 15th March. As mentioned in the previous paragraph, business owners in this situation are exempt. A tweet from their official account says that the contribution will be refunded without the need to apply, and further investigation indicates this will happen in the second half of May.


The retail sector has filed the majority of all applications (123.883) followed by the hospitality industry (112.854) and construction (68.560)

The worst affected autonomous regions are Andalucía, Cataluña and the Comunidad Valenciana.

Following on from yesterday’s email, Royal Decree-Law 8/2020 was published yesterday to complement Royal Decree 463/2020, 14th March.

The chain reaction the outbreak of COVID-19 as caused throughout the world that initially concentrated in China, interrupting much of the world’s production and manufacturing output has now filtered down to other dependent sectors, affecting export and supply.

We have also seen the direct impact it is having on domestic finances, the closure of schools, the cancellation of public events, flight and other transport bans that have primarily shaken the tourist industry, not to mention the effect on the global stock market. The limitations imposed on us since last Saturday have meant restrictions on freedom of movement, quarantine which have generated incredible issues within the family unit and businesses alike, especially for those families whose income derives from the type of activities that have been temporarily banned by the government.

The government’s priority right now is to minimize as much as possible the impact of this lockdown and facilitate measures to ensure we can all bounce back as soon as the situation improves.

Some of you emailed me yesterday about the new situation and as mentioned in my previous email, I spent the day reading through and clarifying certain points of the decree that were not  so I can summarize its key points to you. If after reading this email, you still have queries or concerns about your situation, please do not hesitate to contact me again. Since there has been no official has been published about Holiday Lets, the only thing I will say at this time is that there is a difference between the types of accommodation being mentioned (hotels, camping and caravan sites…) and self-contained units such as private apartments and villas. Hotels and similar call for groups of people to be attended to in the dining area for example as the rooms are not self-sufficient, so this closure may only refer to these types of accommodation. This is not official as mentioned, only my own deductions, however, if your property is currently occupied, remember, the government is encouraging people to return to their countries of residence until this crisis is resolved mainly because airspace is due to be closed down or greatly reduced.

According to this Royal Decree-Law, the following measures have been approved:

1.- Extraordinary Social Security benefits for closure of business activity for those affected by the declared State of Emergency in order to regulate the health crisis produced by COVID-19:

a) Exceptionally and limited to one month1 from the date in which Royal Decree 463/2020, 14th March came into effect when the State of Emergency was officially announced, those sole traders whose business activities were shut down have the right to these “unemployment” benefits as long as the following criteria is met:

  • To be affiliated and currently registered as a sole trader (Régimen Especial de la Seguridad Social de los Trabajadores Autónomos) or at least on the date the State of Emergency was announced (14th March 2020)
  • In the event, your business activity was not directly shut down by virtue of the above-mentioned Decree, you must provide evidence that your billing during the month prior to applying for unemployment benefits has been greatly reduced by at least 75% in comparison to the average billed over the six previous months
  • To be up to date in payment of all Social Security contributions. If this is not the case, they allow a maximum of 30 days in which to make these payments and access unemployment benefits

1 Unemployment benefits would be extended to the last day of the month in which the State of Emergency concludes, should this situation last more than one month

b) The benefit amount is calculated by applying 70% of the average base rate you have paid over the last twelve months, which is to say, twelve consecutive months and immediately prior to applying. If the applicant has not been registered as self-employed for twelve months, therefore not meeting the normal criteria, the benefit amount applicable would be the equivalent of 70% of the minimum base rate

c) As stated, the duration of this extraordinary benefit is one month, which could be extended to the end date of the State of Emergency, however, this time would be recorded as if you had continued paying into the system as normal, i.e., it does not interrupt your registry as self-employed and it does not reduce the time you may receive this same benefit if you have to apply again in future (for a situation unrelated to COVID-19

d) Receipt of unemployment benefits mean you would not be liable to pay Social Security contributions. For those who continue their business activity, you must pay the monthly contribution as normal

e) Receipt of unemployment benefits is incompatible with any other Social Security benefits

f) Working partners linked to co-operatives will be granted the same rights to access these benefits as long as they meet the requirements established above

IMPORTANT NOTE: The Decree does not mention if this applies to Sole Traders registered as Family Collaborators. I am trying to find out whether they would have the right to unemployment after the principal Sole Trader applies.


2.- Measures to regulate employee contracts to avoid dismissals:

a) There is a system in place for those businesses that have suffered the most severe losses due to forces beyond their control such as this health crisis called ERTE (Expediente de Regulación Temporal de Empleo). What is the definition of forces beyond control in this situation?:

  • Suspension or cancellation of business activities
  • Temporary closure of premises open to the public
  • Restrictions on public transport
  • General restrictions and freedom of movement of people and/or merchandise
  • Loss of provisions that hinder the normal development of the business
  • Contagion within the company
  • When extraordinary measures of preventative self-isolation have been enforced in the company

b) In the case of those businesses that on 29th February had less than 50 employees, Social Security will absorb the business owner’s obligatory payments 100%. In the case of those businesses that on 29th February had more than 29th February had 50 employees or more, Social Security will absorb 75% of the business owner’s obligatory payments. These obligatory payments referred to here DO NOT include the business owner’s own monthly Social Security contribution

c) Employees affected by the ERTE system have the right to receive unemployment even if they have not been registered employees for a full year as normally required by law

d) Businesses that choose the ERTE system are obligated to maintain all employees in the company for at least SIX MONTHS after business activities return to normal

e) Social Security must respond to the application within 5 days

f) Employees who have dependents (minors or elderly) should be permitted to take leave to see to their family in the best way possible, however, employees who are absent from their place of work for unjustified reasons may be dismissed (the proper procedure must be followed)


3.- Business Line of Credit:

The Ministry of Economic Affairs will grant a line of credit to ensure cash flow in affected companies (payment of invoices, financial or tax obligations or other cash flow issues). The maximum amount is 100.000 euros and conditions are being drafted


4.- Extensions for Mortgage Loans:

a) For those who have especially difficult circumstances due to the COVID-19 crisis and are unable to make mortgage repayments on their mortgages, special measures apply for their primary residence only

b) Those debtors that fall under the category of “economic vulnerability” as established in Article 9 of the Decree-Law (or point c of this document) and whose contracts are currently in effect. These same measures apply to guarantors of the debtors

c) Definition of economic vulnerability:

  • The debtor has been made unemployed or in the case of sole traders, has suffered a substantial loss of income or a substantial fall in sales
  • That the total income of the family unit does not exceed the income received in the month prior to applying for the extension
        • In general terms, the limit of three times the monthly Indicador Público de Renta de Efectos Múltiples (IPREM)
        • The above limit will increase by 0,1 the IPREM for each dependent child or 0,15 for each child in a single-parent household
        • The general limit will increase by 0,1 for each family member over the age of 65
        • If any family member has a declared disability higher than 33%, dependent situation or illness that does not permit them to work, the general limit will be four times the stipulate IPREM, regardless of any increases

There is still a little bit of uncertainty about some of these measures as procedures have not been clearly outlined etc., and the Administrations themselves are not entirely sure what the logistics would be, but if you would like to proceed with any of these options, please contact me to discuss how best to move forward. If not, it is business as usual until we all come out fighting the other side.

As always, take care

Spain is on a preventative lockdown to help stop the rapid spread of the Coronavirus throughout the country. As the Canaries are part of Spain, all approved legislation applies to us too. I haven’t posted anything publically since we were officially put on lockdown at midnight on Saturday 14th March 2020 because my primary concern has been for my amazing clients and their businesses, so references to yesterday’s email etc is because of the information they were sent as matters were unfolding. Apologies by the way to my registered monthly clients because you may receive this information automatically again as suscribers to this blog (I will try to stop that from happening), but at the same time, I want to say how in awe I am of all of you because you are handling this extreme situation like troopers even though many of your businesses were the first to be affected by the lockdown. I am really proud to count you as clients and I wish you the very best as you navigate daily uncertainties about the future of your businesses while at the same time many of you are also looking after small children, elderly parents, siblings and dependents. It gives me a glimmer of hope…

Social Security procedures tend to be a hot topic of conversation among business owners, and one that is high up on the list is whether it is better to take out a private pension to complement obligatory monthly payments or to simply increase Social Security payments. As I looked into this matter further, I was taken back to the Law of Urgent Measures for Sole Traders which was approved in 2017.

Most people’s initial reaction to receiving any type of official notification is to panic. Others opt to bury their heads in the sand like an ostrich, hoping the situation will “resolve itself”. Both responses are a mistake! Of course it is rare the Tax Office will ever take the time to write to congratulate you on a job well done or to thank you for the taxes you’ve paid diligently every quarter over the past decade but before you go to panic stations, read through the document carefully because many times the Tax Office simply needs to confirm information filed on a declaration and the purpose of the notification does not necessarily result in any form of payment or penalty.