The rise of online sales has opened up new opportunities, allowing anyone with an idea and an internet connection to launch a business from home. With platforms like Shopify and Etsy making it easy to reach a global audience, many people wonder whether it’s possible to run an online store without being self-employed, especially if they’re starting small or selling as a side project.
For those looking to earn some extra income or test out a new business concept, understanding the legal requirements can feel overwhelming. Knowing when self-employment registration is necessary, the financial and legal risks of not doing so, and the benefits of formalizing your activity are crucial for making informed decisions.
In this article, we’ll clarify the key points, including the steps to get started the right way and ensure your online business is fully compliant.
Do I have to register as self-employed to sell online?
Anyone engaging in regular economic activities that generate income is generally required to register with the Spanish Tax Agency (Agencia Estatal de AdministraciĂłn Tributaria, or AEAT) and Social Security. This registration is essential for both paying taxes and contributing to Social Security, which covers benefits like healthcare and pensions. However, not all online sales activities necessarily demand self-employment registration.
A key distinction lies in whether the sales are occasional or regular:
Occasional vs. regular activity
Occasional sales—such as a few one-off transactions of second-hand items—may not require registration, especially if they don’t form a continuous income stream. On the other hand, activities with consistency, frequency, or the intention to generate profit over time are viewed as regular economic activities and thus must be registered.
For example, selling a personal item occasionally on a platform like Wallapop, Vinted or eBay typically doesn’t qualify as an economic activity requiring self-employment registration. However, caution is advised, as regularly selling new products, operating a structured store, or achieving substantial income are indicators that the activity is more than just occasional, making registration necessary to comply with tax and labour regulations.
To answer this question, it’s important to understand that any habitual economic activity generating income must be registered with the Spanish Tax Agency (AEAT) and Social Security. This includes e-commerce.
Can I sell on Shopify without being a business?
One of the appealing aspects of platforms like Shopify is that they make it incredibly easy for individuals to set up an online store and start selling products with minimal setup costs or technical knowledge. This accessibility leads many to wonder if they can operate on Shopify without formally establishing a business or registering as self-employed. In essence, Shopify doesn’t require users to register as a business or have a specific legal status to open a store; anyone can start selling with just a few clicks. However, this doesn’t exempt sellers from their country’s legal requirements for operating a business.
For example, if you intend to sell regularly on Shopify, you are generally required to register as self-employed, as this is considered a continuous economic activity. Occasional sellers or hobbyists who make only sporadic sales may not need to register, particularly if their income remains minimal or infrequent. However, if your goal is to generate consistent income, whether from dropshipping, handmade goods, or branded products, registering as self-employed ensures you are meeting tax and regulatory obligations.
Ultimately, while Shopify itself doesn’t impose business registration requirements, staying compliant with local laws is crucial. Not registering when you reach certain sales thresholds or regularly earn income could result in penalties or fines from tax authorities. This is why many entrepreneurs find it helpful to formalize their business through self-employment registration, even if they’re just starting out on Shopify.
Registering as self-employed or forming a company for my online store
If you decide to formalize your online store, you generally have two main options in Spain: registering as self-employed (autĂłnomo) or forming a company (sociedad). Each option offers different advantages and challenges, so making the right choice depends on factors such as expected income, personal liability, and your ability to manage administrative responsibilities.
Self-employed: flexibility and lower startup costs
Registering as self-employed is often the most accessible route for those just starting out with limited resources. It involves lower startup costs and fewer administrative requirements, making it a flexible and straightforward way to operate your business. However, self-employed individuals bear full personal responsibility for their business, meaning any debts or liabilities incurred by the business are tied to their personal assets. Additionally, self-employed people are subject to regular tax filings and social security contributions, which can increase as income grows.
- Pros: Lower initial costs, fewer legal formalities, and the flexibility to manage income directly.
- Cons: Full personal liability, potentially high tax burdens, and mandatory social security payments.
Forming a Company: Increased Protection and Tax Benefits
Forming a company, such as a Sociedad Limitada (SL), offers a great legal and fiscal protection. In a limited liability company, your personal assets are generally protected from business debts, which can be an advantage as your business grows and takes on more financial risks. However, forming a company involves more administrative costs and legal formalities. Companies are also subject to corporate tax rates and must maintain detailed accounting records, which adds to the administrative burden.
- Pros: Limited personal liability, potential tax benefits, and professional image.
- Cons: Higher startup and maintenance costs, additional legal and administrative requirements, and mandatory capital contributions.
Ultimately, the choice between self-employment and forming a company depends on the specifics of your business goals, financial situation, and growth strategy. Many online sellers start as self-employed and later transition to a company structure as their business matures and revenue increases.
Consequences of selling online without being registered as self-employed
Choosing not to register as self-employed can lead to significant consequences, particularly if you exceed certain income thresholds or conduct regular business activities. In Spain, both the Tax Agency (Agencia Tributaria) and Social Security closely monitor economic activities to ensure compliance, and failure to register can result in a range of financial and legal repercussions.
Fines and Penalties
If you are operating an online store without being registered, the Tax Agency and Social Security may impose substantial fines. These penalties are often calculated based on the amount of undeclared income, and the more revenue you generate, the higher the potential fines. Penalties can also be compounded by additional charges or interest if you have evaded social security contributions. This means that even a small oversight or delay in registration can become costly over time.
Legal Risks
Beyond financial penalties, there are serious legal risks associated with selling online without proper registration. Operating without registering as self-employed can lead to accumulated debts with Social Security, as unpaid contributions will still be owed if you are deemed to have been conducting a business activity. Furthermore, because unregistered business activities lack legal protection, your business may be vulnerable to liability issues, putting your personal finances at risk in case of disputes, accidents, or customer complaints.
In short, while the initial savings from not registering may seem appealing, the potential legal and financial consequences far outweigh any short-term benefits. Proper registration not only keeps you compliant but also protects your business and personal assets from unexpected liabilities.
How to register as self-employed and sell online
If you’ve decided to register as self-employed, here’s a step-by-step process to do it quickly and efficiently:
- Register with Social Security using the TA.0521 form.
- Register with the Tax Agency using form 036 or 037, depending on your activity.
- Obtain a digital certificate to perform online procedures and manage your invoicing.
- Manage accounting and tax obligations, which can be simplified with tools like Xolo, offering specialized solutions for self-employed individuals and online entrepreneurs.
💡Pro tip: Sign up to Xolo and we will register you as an autónomo for free. Sign up →
What taxes will you pay as a self-employed online seller?
Once you’re registered as self-employed, you’ll need to handle two primary tax obligations in Spain: Income Tax (IRPF) and Value Added Tax (IVA).
- Income Tax (IRPF): This tax is based on your net profits, and you’ll be required to make quarterly payments, with a comprehensive annual tax return to finalize your tax obligations. Accurately calculating net income is crucial, as deductions and expenses can significantly impact the amount owed.
- VAT (IVA): In most cases, a 21% VAT must be applied to sales within Spain and the EU. You’ll need to submit quarterly VAT returns detailing these transactions, unless your activities qualify for an exemption (such as specific services provided outside the EU).
Keeping track of these obligations and deadlines is essential to avoid penalties. Using tools like Xolo can make managing these requirements easier, providing support for accurate invoicing, streamlined accounting, and timely tax submissions. This approach helps ensure compliance and reduces the risk of costly errors.
Streamline your online store’s accounting with Xolo
Formalizing your activity as self-employed is a crucial step for anyone wanting to sell online continuously and regularly. While tax obligations may seem complex, having the right support simplifies this process. With Xolo, you can manage all fiscal and administrative aspects of your online business, from self-employment registration to tax filing.
Explore Xolo as a solution to meet your tax obligations and grow your online store professionally. Sign up now →