The capitalised lump sum, or drawing the benefit while you invoice

It is not which is better: it is which you can ask for, and when

Someone with a recognised unemployment benefit who is about to set up on their own faces two doors. Through one comes all the money at once, capitalised, to fund the start-up. Through the other they keep drawing the monthly benefit while already invoicing as a self-employed autónomo. They are mutually exclusive: you go through one, and the other shuts.

And both are applied for beforehand, not afterwards. The lump sum has to be requested before the activity begins — in practice, before registration. The compatibility route is requested within fifteen days of starting. Once those moments pass there is no recovery: the benefit is consumed or it is lost, and that is the part that causes the most distress.

The two routes, side by side

	Capitalised lump sum	Benefit alongside the business
What you receive	The remaining entitlement, capitalised, as a payment to fund the investment, or as a subsidy towards your contributions, or a combination of both	The monthly benefit while you work for yourself
When it is applied for	Before starting the activity	Within fifteen days of starting
How long it lasts	It is a payment: it runs out	A maximum of 270 days, and never beyond what was left of your entitlement
The conditions that filter most	Evidencing the investment and the project; keeping the activity going	Article 33 of Law 20/2007 sets the 270-day cap and rules it out if your last job was self-employed, if you used it in the previous 24 months, or if you invoice your last employer. There is no age limit
Income tax	Exempt under article 7.n of the Personal Income Tax Act, if the activity is maintained for five years	Taxed as employment income, with its own withholding
If the business does not take off	You already have the money, but the commitment to keep going is still alive	You keep drawing while it lasts, and that cushions the fall

With which numbers each one wins

The figures below illustrate the shape of the decision; they are not thresholds.

• The lump sum wins where there is real, verifiable initial investment. Premises with a deposit and fitting-out works, machinery, a vehicle used in the business, stock. With 14,000 € of remaining entitlement and 11,000 € of start-up spending, capitalising turns a benefit into working capital, and does so tax free.
• Drawing the benefit wins where the investment is almost nil and income is slow to arrive. The professional who needs a laptop and little else, with clients who pay at sixty days, collects the full benefit for months while invoicing. That is a cash cushion the lump sum cannot provide, because the lump sum has already been spent on assets.
• Drawing the benefit wins if the remaining entitlement is short. Capitalising four months of benefit to buy very little is usually worse than collecting it while you get going.
• The lump sum wins if the project is capital-intensive and the alternative is borrowing. Against the cost of a loan, capitalising is money with no interest attached.

What nobody tells you about the contributions subsidy

The lump sum can be directed, wholly or partly, towards subsidising your monthly autónomo contribution. It is always presented as an advantage and often is not: if you are going to benefit from the reduced start-up contribution — the one everybody calls the flat rate — you will be spending your benefit entitlement covering a contribution that was already low. The money is consumed just the same, but it buys far less.

That calculation belongs before choosing the route, and it has to be done with the contribution you are actually going to pay rather than the standard one. It is the check that most often changes the decision in this office.

If you are not Spanish, one extra check

Entitlement to unemployment benefit in Spain depends on what you have contributed here, and periods contributed in other EU states can be aggregated through the relevant coordination rules. That is a question about your record rather than about this choice, but it is the first thing to establish, because everything on this page assumes there is a recognised entitlement to capitalise or to draw.

The case that fits neither column

The two doors in the table are the doors of someone who registers as a self-employed individual and nothing more. A good share of the projects that reach us are not that, and the choice gets complicated before you even get to which one suits you.

• Someone setting up a company. The capitalised amount can be used to subscribe capital in a commercial entity, but on conditions of its own: as to when the company is incorporated, as to the effective control you will have in it, and as to whether there was a prior connection between you. They are checked one by one, and the transaction is documented in the deed. It is not the same file as the self-employed person buying machinery.
• Someone who will combine it with employment. Drawing the benefit alongside self-employment and drawing it alongside part-time employment are two different regimes, and combining them means looking at the benefit from the outset rather than once both things have been signed.
• Someone who will work for their old company. If the first client is the employer you worked for immediately before, the combined route is closed, and it is a very common case: you leave the contract and keep invoicing the same place. Know it before choosing the route, not when the payments stop.
• Someone who capitalised before. Having used the lump sum on an earlier project conditions what can be done now, and that history is not always remembered by the person writing to us.
• Someone coming from self-employment. If your last job was self-employed, the combined route is not available to you, even though the lump sum may be. Many people find out late because they read that the measure had an age limit — which came from an earlier wording and no longer exists — and never look at the exclusions that do still apply.

There is also a situation that is ordinary for our readers and unusual for a Spanish employment office: an entitlement built partly on work done in another country. Whether periods completed elsewhere count, and what documentation is needed for them, is decided by the employment service and not by us, and it takes time. Anyone in that position should start the enquiry weeks before the planned start date rather than days before. It is also worth remembering that the application, the accrual and the preservation of the right to the benefit are governed by article 296 of the General Social Security Act. That is not abstract doctrine: it is what explains why a day's delay in applying is not recovered by asking afterwards.

What to look at before deciding

Seven pieces of information, and the comparison stops being a hunch:

• The employment service certificate showing the days of benefit left and the daily amount. Without that document the pot is a figure from memory, and it is nearly always wrong.
• The start-up budget with documents behind it: quotations, proforma invoices, the lease for the premises. Investment has to be evidenced, not described.
• The real date the activity begins, because both deadlines hang off it and they are not the same deadline.
• The monthly contribution you will actually pay, with the start-up reduction if it fits, so as to know whether subsidising it is worth spending the pot on.
• Your collection forecast: when you issue the first invoice and when you are paid for it, which are not the same thing.
• Whether you are going to incorporate a company, with whom, and in what percentages.
• Your five-year horizon, because the relief attaching to the lump sum requires it, and nobody should sign up to a five-year commitment without having thought about it.

How we handle it

Three facts and it answers itself: how much benefit you have left, what it really costs to get started, and when you expect to be paid the first invoice. With those we calculate both routes in euros over twelve months, including the autónomo contribution you will pay under each scenario and the tax on each receipt.

And we cross it with the decision that sits right next to this one, the timing of your registration, which is not free here because it governs the deadline for both applications: registering before or waiting to invoice. It is on benefit plus self-employment, and the form asks about the remaining entitlement and the planned investment, which is what decides it.