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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.

Published: 13 May 2021 14:52 CEST
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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TAXES

EXPLAINED: The key changes to Spain’s 2023/2024 annual tax return

Spain's annual tax return period kicks off on Wednesday April 3rd, and there are several changes you should know about for the 2023/24 tax return, known as 'la renta' in Spanish.

Published: 2 April 2024 12:57 CEST
Updated: 6 April 2024 10:59 CEST
EXPLAINED: The key changes to Spain's 2023/2024 annual tax return

It’s that time of year again in Spain – tax season!

Personal income tax is known as IRPF in Spain (Impuesto sobre la Renta de las Personas Físicas) but most Spaniards simply refer to it as la renta because the  tax return itself is called la declaración de la renta.

This year, you must file your taxes for the previous financial year – that is to say, 2023. The campaign starts on Wednesday 3 April 2024.

From that date, you can present your taxes for 2023 online, and the campaign this year runs until July 1st.

Key dates for Spain’s 2023/24 tax return

For the 2023 fiscal year, you must file your tax return between April 3rd-July 1st 2024.

The key dates are as follows:

April 3rd – July 1st 2024: online filing
May 7th – July 1st 2024: by telephone (appointment request from 29 April-28 June)
June 3rd – July 1st 2024: in person at its offices (appointment request from 29 May-28 June)

Key changes to Spain’s 2023/24 tax return

Self-employed

As of 2024 all self-employed people (known as autónomos in Spanish) are now obliged to file a tax return, regardless of their income level. Previously, only those who earned more than €1,000 a year had to make an IRPF declaration.

Self-employed workers who are taxed in the module regime will see the reduction on net returns increase from 5 percent to 10 percent, and those who work from home can make a deduction of up to 30 percent on expenses related to their work activities.

Self-employed people taxed under the estimation system, which you can read more about here, will now be able to make an additional deduction of 2 percent, raised to 7 percent.

The types of tax deductions those on this type of regime can apply include:

  • Monthly Social Security contributions
  • Deductions for the vehicle usage (if it applies to your business)
  • Deductions for business-related training expenses
  • Special deductions, such as research and development expenses
  • Tax relief at a regional level

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Electric vehicles

Taxpayers who bought (and registered) an electric vehicle in Spain in 2023 will be able to deduct 15 percent of the total purchase value, including expenses and taxes. They can also exclude any public subsidies they have received to aid the purchase with a maximum base of €20,000.

They can also deduct 15 percent up to a maximum base of €4,000 for the installation of a charging point.

Maternity deduction

Previously, only working mothers could benefit from a deduction (€1,200 per year for each child under the age of three) when making their tax return.

Now, even if the mother was not working but collecting unemployment benefits at the time of the birth, or if she subsequently paid social security contributions for 30 days or more, she will be able to benefit from this deduction and even apply for an advance payment of €100 per month.

READ MORE: The tax deductions you get in Spain for having a child

Capital gains increases

The tax rate on capital gains income has been raised by a percentage point to 27 percent for income over €200,000.

For capital gains over €300,000, it’s been raised to 28 percent.

READ ALSO: Spain’s plusvalía tax on property sales: What you need to know

Startup companies

From 2023 onwards, deductions for new and startup companies in Spain have improved. Taxpayers may deduct from their tax liability up to 50 percent of the amounts paid for shares or holdings in new or recently created companies, the maximum deduction base being €100,000 per year.

READ ALSO: Which startups succeed in Spain (and which ones fail)?

Our journalists at The Local are not tax experts. This article is intended to be informative, but you should always seek the advice of a tax or legal expert before making decisions.

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