Obligation to register with Social Security for directors and partners, both for resident and non-resident directors.
It is common for doubts to arise about the obligation to register with Social Security for administrators and partners, whether they are residents or not.
In this article we will try to resolve the most common questions that tend to arise:
- Does it affect whether I am resident or non-resident in Spain?
- How does it affect whether or not I carry out management work for the company?
- And if I have effective control of the company?
If I am a non-resident, am I obliged to register with the Social Security?
Our first consideration when it comes to knowing the scope of application of registration with the Social Security. As stated in Art.7 of the LSS “Spanish nationals who reside in Spain and foreigners who reside or are legally present in Spain shall be included in the Social Security system, for the purposes of contributory benefits, regardless of their sex, marital status or profession, provided that, in both cases, they carry out their activity in national territory…”.
Therefore, the question of whether a non-resident owner in Spanish territory who owns 100% of a Spanish entity of which he is the administrator is obliged to pay Social Security benefits, the answer is NO.
What is advisable, however, is for this person to appoint a legal representative to represent the company on his behalf before the Social Security and third party organisations.
What if I am a resident in Spain and a shareholder with effective control?
If you are a partner with effective control, you must register with the Social Security System. A person is considered to have effective control of a company when he/she holds at least 50% of the shares or holdings of the company, and also when he/she:
- He/she has 50% of the capital by adding his/her shares, those of his/her spouse and those of his/her relatives by blood, affinity or adoption up to the second degree, provided that he/she lives with them.
- Holds 33% of the company’s share capital.
- He/she holds at least 25% of the capital and exercises leadership and management functions.
If, in addition to having effective control, he/she works in the company on a regular basis carrying out management and administration tasks, then he/she will be obliged to contribute to the Self-Employed Scheme.
There are two exceptions:
– I do not have effective control and I am not a director – In this case you do not have to pay contributions.
– I am a passive administrator and I do not carry out management tasks – In this case, you should not pay contributions.
It is important to clarify that passive administration means that you are limited to calling the meetings and signing the accounts, while another person directs or manages the business.
What about being a resident in Spain but a shareholder without effective control?
- I am a paid active administrator, carrying out management and administration functions – I will pay contributions under the General Regime as an assimilated person.
- I am a non-remunerated active director, but I am remunerated as an employee of the company – In this case, you will also pay contributions under the General Regime as an assimilated worker.
- I am an active administrator whose position is unpaid and I do not perform management functions for the company nor am I an employee of the company – Then you will be excluded from the scope of application of Social Security and you will not have to pay contributions.
- I am a passive administrator – You will only have to pay contributions if you work for the company as an employee. In this case, it will be under the Ordinary General Scheme.
In conclusion, it is not because you are the owner of a company that you are obliged to register with the Social Security, far from it.
Furthermore, residence in Spain, as well as the performance of management tasks in the company or the tasks of a “worker” will be decisive in assessing the administrator’s registration with the Social Security. If you have any doubts, Leialta will be happy to answer them, please contact us.
Leialta’s website: https://www.leialta.com/en/
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