Self-employed & entrepreneurs

Self-employed: the bank sees your profit, not your turnover

Self-employed buyers and business owners are financed in Spain — routinely, and with no penalty for being self-employed. They fail on something else: which figure the bank accepts as income.

An employee submits three payslips and the case is clear. For a business owner, the Spanish bank examines annual accounts and tax assessments over several years and looks for a stable, recurring result. Not the best year. The reliable one.

• Turnover — impresses nobody. It appears nowhere in the bank's calculation.
• Profit — this is the figure that counts. Declared and documented.
• What stays in the company — does not count. Retained profits are not the shareholder's private income. Anyone who has deliberately drawn little for years to optimise tax appears before the bank with a low income.

Tax optimisation and creditworthiness pull in opposite directions. That is not a criticism of your accountant — it simply means that if you intend to buy in Spain within two years, distribution planning belongs on the table today.

The debt-service ratio of 30 to 35 per cent of net income applies here too — business loans, leases, guarantees and your mortgage at home included. And a common error: future rental income from the Spanish property is not counted. Existing rental income is recognised, often only in part.

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