Capitalizing unemployment benefits to register as a self-employed worker

Capitalizing unemployment benefits (capitalización del paro) is a very attractive option for future self-employed workers who are receiving unemployment benefits from their previous salaried employment. Capitalizing unemployment benefits means receiving the benefit as a single lump-sum payment so that you can start a business as a self-employed worker with the money received.

However, you should bear in mind that, among other requirements, capitalizing unemployment benefits requires you to substantiate the investment so that its purpose is solely business-related. We explain these requirements below.

Requirements and conditions for capitalizing unemployment benefits

The basic prerequisite for capitalizing unemployment benefits is, obviously, to be receiving this benefit from the public authorities.

In addition to this prerequisite, a series of further requirements must be met in order to receive unemployment benefits as a lump-sum payment:

• You must not yet have registered with Social Security as a self-employed worker or have started your activity.

• You must still have at least 3 months of unemployment benefits left to receive.

• You must not have capitalized unemployment benefits in the previous four years.

• You must provide evidence of your registration as a self-employed worker on a stable basis and start the activity within a maximum of one month from the date the lump-sum payment is approved.

• If you have challenged a dismissal that gave rise to your unemployment, you cannot apply for capitalization until the challenge proceedings have been resolved.

How to capitalize unemployment benefits

To process the capitalization of unemployment benefits, you must submit a formal application. This application can be submitted online through the website of the Spanish Public Employment Service (SEPE), in person at the benefits office (by appointment), or at the registry office in your city.

Documents required to capitalize unemployment benefits

The documents required to apply for the lump-sum unemployment payment are as follows:

1. Lump-sum payment application on the official form.

2. National Identity Document (DNI) or passport, for Spanish nationals.

3. If you are a foreign national legally resident in Spain:

• EU nationals: registration certificate as a citizen of the European Union showing your foreigner identification number (NIE), together with your passport or identity document from your country of origin.
• Non-EU nationals: Foreigner Identity Card (TIE) showing your NIE, and your passport.

4. Explanatory report on the project.

In addition, once the capitalization has been granted, you must submit the following within one month:

5. Document evidencing your registration with Social Security as a self-employed worker.

6. Supporting documents for the investment already made.

Ways of capitalizing unemployment benefits

There are two ways of capitalizing unemployment benefits that you can opt for, depending on the investment you are going to make: a lump-sum payment or monthly payments.

Capitalizing unemployment benefits as a lump-sum payment

If you make an initial investment to carry out the project, you can finance it with the full amount of the unemployment benefits you still have left to receive.

If you do not need the entire balance for the investment, it would be split. In other words, you would receive one part for the investment and the remainder through the offsetting of your monthly self-employed contributions.

Capitalizing unemployment benefits in monthly payments

If you have no investment to make, the authorities, in that case, allow you to allocate 100% of the benefit to offsetting your monthly self-employed contributions.

This means, as with the percentages when the benefit is split, that instead of giving you the money all at once, your Social Security contributions are covered, so you save that money each month.

This is a viable option for self-employed workers who do not need a large outlay to start their activity but will need funds as they go along.