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EXPLAINED: Why Spain’s self-employed may soon pay a lot more in monthly fees

Spain’s government has proposed a controversial change to the "autónomo" system which would see self-employed workers in Spain pay between €90 and €1,220 per month in social security contributions, apart from paying income tax as well. Here’s what you need to know.

Jose Luis Escriva
Photo: PIERRE-PHILIPPE MARCOU / AFP

The Spanish government first announced its plan to overhaul the autónomo system back in October 2020, saying that they would propose a way in which social security payments would be linked to yearly earnings, rather than just one flat fee.

Currently, most autónomos pay around €283 a month (lower in first two years) in social security fees, meaning that you contribute the same, whether you earn €20,000 a year or €200,000.

In theory, an overhaul the autónomo system is a good thing and something that self-employed people have been demanding for years.

However,  the new proposal by Spain’s Minister of Inclusion, Social Security and Migrations José Luis Escrivá could see some autónomos paying up to €1,220 per month, just in social security contributions.

Self-employment unions in Spain have already decreed the new payment proposals to be “outrageous”.

Both the president of the National Federation of Self-Employed (ATA), Lorenzo Amor, and that of the Union of Professionals and Self-Employed Workers (UPTA), Eduardo Abad, have expressed anger at the new proposal. 

Speaking to Europa Press, Amor criticised the move and has rejected the proposal. “Tomorrow the CEOE Social Security commission will meet, and there is no way we will agree with this draft that the Government has sent,” he said, after noting that “there hasn’t been any dialogue or negotiations in place”.

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How would the scheme work under the new proposal?

Under the new proposal, the minimum quota for the self-employed would be €90 per month and would rise from there, up to €1,220 per month, depending on how much you earn.

However, the €90 per month would only be applicable to those earning up to €3,000 net per year, which is not even enough to live on in Spain.

This would mean that those earning just €3,000 per year or less would be expected to pay €1,080 in social security fees. 

And it doesn’t seem to get any better from there upwards. Those earning between €12,600 and €17,000 net per year would pay €275 per month and those earning between €17,000 and €22,000 would pay €305 per month.

According to Statista, the average annual wage in Spain in 2019 (not taking into account the Covid-19 years) was €27,500. Spain’s National Statistics Institute reported in June 2020 a lower average gross annual figure of €24,000, but this applied to 2018.

Under the new proposal, it means that anyone earning the average amount or above would be paying €425 to €545 or more per month in social security payments. The top amount rises to €1,220 per month for those earning above €48,841 per year.

Self-employed in Spain already pay the highest monthly social security fees in Europe, far higher than the UK’s €14/month (minimum fee), the Netherlands’s €50 a year, and Germany’s €140 for those earning more than €1,700 a month.

Many already consider the flat fee of €283 a month to be crippling, and if the new thresholds come into play, it could mean that thousands could struggle to even stay self-employed.

When would the new rules come into force?

If Escrivá gets the go-ahead, the new changes to social security payments will start to come into force next year, but the effects wouldn’t be seen until 2023.

However, the changes would not happen all at once and the social security payments would gradually rise or fall over a period of nine years, during which the reform would be progressively implemented.

How would the process work?

Because of the nature of being self-employed, most freelancers who work for a variety of different clients don’t know how much they will earn in a year. Therefore, you will have to estimate your annual earnings in advance to know how much social security you will have to pay. You will be able to change your forecasted earnings up to six times per year. 

If at the end of the year, your estimate is different from the amount you actually earned you will have to pay extra social security or will receive a refund, depending on whether you earned more or less. 

READ ALSO: Self-employed in Spain: What you should know about being ‘autónomo’

Member comments

  1. As an autonomo at the lower end of the scale, this is unlikely to impact on me, but this story misses a very important point.

    Autonomo fees are tax deductible – thus, these new payments will reduce the automono’s income tax liability.

    Looking at the way the proposed fees are structured, they appear to increase from about 23% at 22,000 euros to 29% at 48,841 euros – I’m sure it’s no coincidence this rightly tracks the rising income tax rates from 30% to 37% paid by people on profits at that level.

    Some autonomos may indeed pay more tax overall, but it’s definitely not going to be insane!

    This really needs an accountant’s eye to give an indication of the real-world effect.

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Q&A: How will Spain’s new social security system for the self employed work?

The Spanish government announced new tax rates for the self-employed from 2023, but many "autónomos" are confused as to exactly how it will work in practice. Here's everything you need to know, to help you understand better.

Q&A: How will Spain's new social security system for the self employed work?

From 2023 Spain’s autónomos will pay monthly social security fees based on “real earnings” in a similar way to how it works for income tax. The Spanish government revealed the new rates at the end of July 2022. 

The changes mean that rather than there being a fixed minimum contribution base of €294, self-employed workers will pay different monthly amounts based on how much they earn. It will go from €200 a month for lower earners to €590 a month for higher earners.

READ ALSO – CONFIRMED: Spain’s new tax rates for the self-employed from 2023 onwards

However, many of those who are self-employed are confused by the new rules and have many questions regarding exactly how much they’ll be paying from next year. 

Here are some of the most common questions asked and the answers, which are based on an interview with Social Security Minister José Luis Escrivá on radio station Cadena Ser. 

Q: When will the new system come into effect?

A: Autónomos will start paying the new social security quotas from January 1st 2023.

Q: How will I know what income bracket I will be put into?

A: At the beginning of the year, each autónomo will have to state their expected income level using a special tool called ‘importas’ or imports. This will help you calculate how much you might potentially earn during the year. You will be able to modify and change your income bracket six times per year, based on your real earnings. At the end of the year, you will find out what your final real earnings are and your fee will be adjusted accordingly.

READ ALSO: Will you pay more under Spain’s new social security rates for self-employed?

Q: Does that mean I will get my social security back if it turns out Ive paid too much?

A: Yes, essentially like the income tax, you will be paid part of your social security fee back again if it turns out you’ve paid too much. On the other hand, it also means that you will also have to pay more social security if you have paid too little.

Q: How will the new system work if I only work sporadically?

A: As mentioned above, you will be able to change your expected income every two months. This means those with seasonal work will end up paying less in social security fees than they do now, during the months when they get less work. When you begin to earn more, you can change your expected income level again and will be charged more.

Q: What will happen to the tarifa plana or flat rate scheme whereby new autónomos start out paying only €60 per month in social security fees?

A: The tarifa plana as it stands currently will end and those on it will not continue paying the same amount. Instead, new autónomos will pay a flat fee of €80 per month for the first year and will continue at this rate in year two, only if they earn below minimum wage. Low earners, those who earn less than €670 per month will see their rate reduced to €230 in 2023, €225 in 2024 and €200 in 2025.

Q: What will happen if I have to close my business for some reason, do I have to de-register completely?

A: The new law now states that if you are forced close your business partially or temporarily, such as in the case of the volcano eruption in La Palma, you now don’t have to deregister completely from the autónomo system. Those who have to partially close their business will be able to apply for financial help, even if they do not close completely.

Q: Why is there such a big difference between the social security rate in Spain and other European countries?

A: According to Escrivá, Spain is one of the countries with the highest level of protection for self-employed people in Europe. In other countries, you may pay less in social security fees, but will not get pensions, sick pay, maternity or paternity benefits, he explained. It also means you have aid benefits during a crisis such as the Covid-19 pandemic or if you own a shop on a street that has to be closed for construction, for example.

Q: How will we know if the new changes will be successful or not?

A: These reforms essentially mean higher pensions for the self-employed, as well as higher and better benefits. When autónomos start benefitting from these, then we know that it is successful, said Escrivá. 

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