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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”.

READ ALSO:

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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For members

TAXES

Can you pay taxes in Spain with a foreign bank account?

Many foreigners have tax obligations in Spain but might not have a Spanish bank account to pay them from. Changes by Spain's tax authorities might just make it easier, depending on your circumstances.

Published: 3 May 2024 09:01 CEST
Can you pay taxes in Spain with a foreign bank account?

Navigating the ins and outs of the Spanish tax system can be a little daunting at times. That’s why many people choose to pay for a gestor to handle it all for them.

But for many foreigners in Spain, especially those with property in the country but who aren’t resident, figuring out when and how to pay your taxes can be extra complicated, especially if you don’t speak Spanish.

READ ALSO: What does a ‘gestor’ do in Spain and why you’ll need one

This was compounded by the fact that, for many years, you couldn’t pay Spanish taxes from a foreign bank account. As such, many people were forced to open a Spanish bank account for the sole purpose of paying tax.

Can you pay taxes in Spain with a foreign bank account?

Fortunately, it’s no longer like that. From February 1st 2024, the tax authorities in Spain started allowing tax payments via direct debit from any bank account within the SEPA area, removing the need for a Spanish bank account.

So, in short, yes, you can pay your Spanish taxes with a foreign bank account — depending on the country in which the account is based.

What is SEPA?

SEPA stands for Single Euro Payments Area is a basically an integrated bank transfer system. SEPA includes all the EU members states, plus those in the EFTA (Iceland, Norway, Liechtenstein and Switzerland). The UK is also still member of the SEPA area, despite Brexit.

Before the change, you could only pay your taxes in Spanish via banks approved by the tax authorities.

READ ALSO: Spanish tax returns: A handy guide for foreigners

VAT and tax experts Marosavat explain that under the previous rules, “direct debit [was] only available when the taxpayer’s bank account belongs to a bank entity cooperating with the Spanish tax authorities. This requirement impose[d] an important restriction when using direct debit as a payment method, especially for foreign taxpayers.”

But slowly, the Spanish tax authorities have eased the rules and made it easier for foreign businesses and tax payers to pay their tax from abroad. First, in March 2021, the rules were relaxed for foreign businesses with tax obligations in Spain. 

Then from July 2023 foreign accounts were approved for deferment and split applications of tax debt, and from February 2024 for regular tax payments.

Following the changes, Marosavat says, “the payments will still be processed through a cooperating bank entity, which communicates with the taxpayer’s bank entity. In consequence, all commissions and bank expenses related to the procedure will be passed on by the tax administration to the taxpayer.”

According to Spain’s Agencia Tributaria website, which you can find an English language version of here:

  • Payments are allowed for those who do not have an open account in any collaborating entity in state collection management.　

  • It is especially intended for use by those who pay their debts from abroad.　

  • It can be done by both natural persons and legal entities.　

  • The payment will have releasing effects on the date of receipt and entry of the transfer. 　

Non-resident property owners

This is particularly welcome news for second home owners in Spain, many of whom are non-resident and manage their properties from abroad for most of the year. 

According to IberianTax, by extending tax payments to the wider SEPA area, “property owners can now continue to use their home country’s bank accounts or accounts from other SEPA countries to make tax payments towards their taxes. This change simplifies the process and alleviates the burden of setting up a separate Spanish bank unnecessarily.”

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