The pago único, or capitalisation, means receiving in one go the present value of the contributory unemployment benefit you still have left to draw, in order to use it to start a self-employed activity. It is the route that puts the most money on the table at once, and also the one with the most requirements, the one that sees the most applications refused and the only one that carries a five-year commitment under IRPF, the Spanish personal income tax.
It is worth starting with the order of steps, because that is where it is lost: the application has to be dated before the activity starts. This is not a formality that can be fixed later. If the registration as self-employed is already on record, this door is closed.
Where it is regulated
Article 296.3 of the consolidated text of the General Social Security Act (LGSS) allows the managing body to pay in one go the present value of all or part of the contributory benefit still to be received, and to pay in instalments the amount intended to subsidise contributions. The rules that apply today are in article 34 of Act 20/2007 on the Statute of Self-Employed Work (the LETA), which also keeps Royal Decree 1044/1985 in force to the extent that it does not contradict its rules. That is why, when studying a case, both texts have to be read: the modern one sets the framework and the old one keeps the procedure.
What it can fund
Article 34.1 of Act 20/2007 allows up to one hundred per cent of the present value of the benefit to be paid in two situations, with additions common to both:
| Use | What the rule says |
|---|---|
| Setting up as a self-employed worker | Payment is made in one go for the amount corresponding to the investment needed to carry on the activity, including the amount of taxes due on starting up |
| Contributing to the capital of a commercial company | Newly formed, or formed no more than twelve months before the contribution, provided you will hold effective control of the company and carry on in it a professional activity that falls under the self-employed scheme |
| In both cases | Costs of forming the entity and getting it running, and payment of fees and taxes |
| Advice | Up to 15 % of the capitalised amount can go on specific advisory, training and information services related to the activity being started |
That same article contains two express exclusions. It does not cover anyone who becomes an economically dependent self-employed worker (a TRADE, someone who earns most of their income from a single client) by signing a contract with a company with which they had a contractual relationship immediately before becoming legally unemployed, or with a company in the same group. And, on the company route, it does not cover anyone who had an employment relationship immediately before with that company or with another in the same group.
For the company route the rule does not ask for some limited degree of control: it asks you to hold effective control of the company in the terms of the twenty-seventh additional provision of the General Social Security Act, and also to carry on in it a professional activity that falls under the self-employed scheme. How the shares are distributed and who sits on the board of directors decide whether the file is approved or refused, and a deed that has already been signed is very expensive to fix. This conversation happens before the visit to the notary, not after.
For anyone joining a worker cooperative or a worker-owned company (sociedad laboral), the regime is that of Royal Decree 1044/1985, with its own paperwork: a certificate showing that admission has been applied for and the terms on which it will take place and, if the entity is newly created, the draft articles of association, with payment conditional on the resolution admitting you as a member or on the company actually being registered.
The second option: having your contributions paid
Rule 2 of article 34.1 allows the managing body to pay the benefit monthly in order to subsidise your social security contributions. The amount is calculated in whole days of benefit, is fixed, and matches the worker's full social security contribution at the time the activity starts, without reflecting later changes, with a floor: if it came out below the contribution corresponding to the minimum contribution base in force, the latter is paid. Payment is made month by month, after checking that you are still registered.
The two options can be combined. If the investment does not use up the whole amount, the rest can go to contributions. And that combination is the fine decision in this file: how much as capital now and how much as contributions over the following months. The answer depends on whether your project needs the money on day one or needs breathing space for a year.
Exactly how much is paid
You do not receive the arithmetic sum of the monthly payments outstanding: you receive their present value. The rule states that the amount of the benefit is paid calculated in whole days, deducting the amount corresponding to the legal rate of interest. It is a financial discount for being paid early, and it explains why the figure in the decision is somewhat lower than the one worked out on the back of an envelope.
There are also two entry filters that come from Royal Decree 1044/1985 and still apply: having at least three monthly payments still to receive, and not having used this right in the four years immediately before. To these is added rule 4 of article 34.1 of Act 20/2007: anyone who, in the twenty-four months before the application, has combined self-employed work with the contributory benefit is left out.
The timetable, step by step
- Before registration. The application is filed with a report explaining the investment project and the activity to be carried out, and with the documents that show it is viable. The application date must be earlier than the date the activity starts, and that start is taken to be the date shown as such in the application to register with the Seguridad Social, the Spanish social security system.
- Decision. Royal Decree 1044/1985 provides for fifteen days from recognition of the benefit if the lump sum was requested together with it, and thirty days if it was requested later. The decision can be challenged through an administrative appeal.
- After being paid. There is a maximum of one month to start the activity for which it was granted and to register under the relevant scheme, or to show that you are in the start-up phase.
- Proof of use. You have to show that the money was applied to the project, with the documents that justify the transactions carried out and the amounts paid.
On that last point, the warning we repeat most often: if the money received is not applied to the activity for which it was granted, it is treated as an undue payment, with the obligation to repay that brings. And the rule presumes, unless proved otherwise, that it was not applied when the start of the activity and the registration were not shown within the one-month period. Keeping invoices and proof of payment from the first day is not bureaucracy: it is what holds the file up.
The income tax exemption and the five-year commitment
Article 7.n) of the Spanish Income Tax Act exempts unemployment benefits recognised by the managing body when they are received as a lump sum under Royal Decree 1044/1985, provided the money is used for the purposes and in the cases set out in that rule. The exemption is conditional on keeping the share or stake for five years, if you joined a worker-owned company or cooperative or contributed to the capital of a commercial company, or on keeping the activity going for that same period, in the case of a self-employed worker.
It is worth understanding what happens if the condition is broken: the tax benefit is clawed back, meaning that income becomes taxable; you do not have to repay the benefit to the SEPE, the state employment service, for that reason. They are two different consequences, and they are often mixed up.
Article 5 of Royal Decree 1044/1985 provides that the benefit is treated as extinguished when the worker receives its full amount at present value, and that no new entitlement can be recognised until the time over which the benefit would have run, had it not been paid that way, has passed. Put plainly: if the business does not work out after eight months, there is no benefit to go back to. That is the price of taking it all today, and it has to be kept in mind when comparing with suspension.
How we prepare the file
The numbers first: how much is outstanding, how much really needs to be invested and how much is best left for contributions. Then the project report, which is not a box-ticking exercise but the document on which the viability of the project is assessed. Then the application, with the right date and before registration. And then the timetable of what has to be proved and when, because some of the problems with this route appear months later, when the use of the money has to be shown.
We do not promise approval: the SEPE decides, assessing whether the project is viable. What we offer is that the file arrives complete and in the right order, and that you know in advance which points are the weak ones in yours. You can start with the form for this service, or first compare the alternatives in the three routes.