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FREELANCING

Everything that changes for self-employed people in Spain this year

New social security contributions, a tax to top up pension funds, a reduction in retention rates for artists - 2023 will bring many developments for all self-employed workers in Spain.

Published: 25 January 2023 15:56 CET
Everything that changes for self-employed people in Spain this year
Everything that changes for self employed in 2023. Photo: Claudio CRUZ / AFP

New social security contributions for self-employed

From 2023, Spain’s autónomos will pay monthly social security fees based on how much they earn, instead of a fixed rate. Previously, freelancers have had to pay a minimum contribution base of €294 per month after they have been registered as self-employed for two years, regardless of how much they earn.

Instead of there being a fixed rate of €294, the fee will go down progressively to €200 a month for lower earners and progressively higher – up to €590 a month – for higher earners. This means that some self-employed workers will see their social security payments reduced, however, for anyone earning over €1,700 per month, they will increase.

New tax for all workers 

From 2023, all workers, whether self-employed or salaried in Spain will have to pay an extra tax to help fill up the country’s pension fund. Trade unions estimate that for autónomos, the average monthly payment will be around €5.

READ ALSO: Everything that changes about working in Spain in 2023

No social security tax for new autónomos in Madrid

Back in September 2022, the regional government in Madrid announced that from 2023, new autónomos in Madrid will have their social security fees paid for by the local government for their first year of self-employed work in the region.

If their monthly earnings are below minimum wage in the second year (€1,166 gross a month), they will also have their social security fees covered by the regional government. This means that new self-employed workers in Madrid will save hundreds or potentially several thousands of euros during their first year or two years of work.

READ ALSO: The tax changes in Spain in 2023 that you need to know about

Benefits for self-employed mothers

Women who are self-employed and have children under 3 years of age will receive a benefit of €100 per month until the child has their third birthday. 

To be eligible, at the time of giving birth, they must either be receiving a benefit or subsidy for unemployment or be registered with Social Security. Women who register later and have already accumulated at least 30 days of contributions will also be eligible. 

READ ALSO: How to hire someone if you’re self-employed in Spain

Reduction in retention rates for artists 

The withholding rate or IRPF for artists with the lowest level of income will be reduced to 7 percent. Previously, it was only 7 percent for the first couple of years of being an autónomo and from then on it went up to 15 percent. 

Changes for unpaid/late invoices  

As a freelancer, it’s unfortunately likely that you’ve been in a situation where you’ve had unpaid or late invoices and you’ve still had to pay tax on them, without having actually received the money yet. You then only had a limited amount of time in which to modify or change your invoice to reflect the fact that it hadn’t been paid. 

This situation is set to get easier in 2023 as the period in which you can rectify your invoice has been extended from 3 to 6 months. The methods used to claim payments have also been made more flexible and the minimum amount of the tax base that can be modified has been lowered from €300 to €50.

The threshold for tax declarations changes

In 2023 self-employed taxpayers whose gross income does not exceed €15,000 per year will not be required to file their yearly 2022 tax return. 

This means that in April when it’s time to file the Declaración de Renta, those who have earned income from more than one source will not be obliged to declare if the sum of all their income does not exceed €15,000. Previously, the threshold was €14,000. 

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AMERICANS IN SPAIN

EXCLUSIVE: What the new Spain-US social security deal means for Americans

The Local speaks to the Spanish government and tax experts to understand what the new social security and pensions agreement between the United States and Spain means for American workers, digital nomads and pensioners in Spain.

Published: 15 May 2024 11:10 CEST
EXCLUSIVE: What the new Spain-US social security deal means for Americans

In early April, the United States and Spain announced a new social security and pension agreement.

The first update to the bilateral agreement between the two countries since 1986 was announced by US Ambassador to Spain, Julissa Reynoso, and Spain’s Minister of Inclusion, Social Security, and Migration, Elma Saiz.

The official agreement is unpublished so The Local spoke with a representative from Spain’s Ministry of Inclusion, Social Security, and Migration as well as international tax experts to understand the agreement in more detail.

Key aspects of the agreement

The Ministry told The Local Spain that the agreement is a step towards, bolstering mobility between Spain and the United States by improving pension calculations and social security protections.

The agreement has to do with the accumulation of benefits and affects working Americans living in Spain. There are two main components; the first affects which system people pay into (Spanish or American) and the second maximises the amount people can collect from social security.
 
Regarding paying into social security, the new agreement extends the “posting period” from three years to five years, with the possibility of extending it to seven years.

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This is meaningful for US employees who are working in Spain and means that they can now pay into the US social security system, rather than the Spanish social security system for longer.

Whereas the employee contributions in Spain and the United States are similar, 6.4 percent in Spain and 6.2 percent in the United States, the rate that employers pay differs greatly. In the United States the employer pays 6.2 percent into social security, whereas in Spain they pay 31 percent.
 
Why does this matter? “Previously when Americans moved to Spain, US employers were cutting the amount that they paid in salary because the cost of employment went up so much”, Louis Williams, Co-Founder and CEO of Entre Trámites, told The Local Spain.

It’s also made employers hesitant to grant digital nomads an Employer of Record (EOR) which would allow American workers to be on a Spanish contract.

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In terms of collecting benefits, the representative from Spain’s Ministry of Inclusion, Social Security, and Migration says, “In the calculation of the Spanish pension there have been technical modifications that will benefit especially those people who developed their last working life in the United States, without this harming those who have worked in Spain immediately before requesting the benefit.”

In other words, under the new agreement, after calculating a person’s benefits under each country’s system, the recipient will be awarded the most beneficial of those two calculations.

Impacts for self-employed workers and digital nomads

According to the Ministry, “The agreement allows self-employed workers to temporarily move to the other State while maintaining their legislation, a possibility that was previously restricted only to employed workers.”
 
This has big implications for people who avoid moving to Spain because of the complicated social security contributions scheme, as they’ll now be able to continue paying US social security taxes (rather than Spanish) for up to seven years.
 
“The interesting thing is if this is extended to digital nomads because it would make the digital nomad visa more attractive,” says Williams.

“Why? Because if you’re posted by an employer (who can now avoid high Spanish social security taxes) you’re eligible for Beckham’s Law.” The law, which does not extend to autonomous works, can cap tax liabilities at 24 percent.
 
Being posted could make life much simpler, according to Elliott Locke, ACSI, co-founder of abroaden, a financial wellbeing and education start-up for people living abroad headquartered in Barcelona.

“The calculus is harder for freelancers given the different legal structures and methods for freelancing between the two countries. In many ways, if an American moves here to work remotely, it could be beneficial for them to have their US-based employer hire them on a local contract through an employer-of-record,” Locke told The Local.
 
In short, the new agreement could make it more attractive for U.S. companies to post employees in Spain, making them eligible for Beckham’s law and allowing autonomous workers to pay into the U.S. social security system, making it more beneficial and easier to be a digital nomad in Spain.

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Who benefits from the new agreement?
 
The people who will feel this new agreement the most are employers, digital nomads, retirees who have paid into both systems over the years, and finally, civil servants. “Spain has incorporated as possible beneficiaries of the Agreement those people who have contributed to the civil servant’s regime (passive class regime), who were excluded in the previous Agreement,” says the Ministry.
 
When can we expect the new agreement to come into force?

Don’t hold your breath; this is Spain after all, but we can expect the agreement to come into force within the next two years.

The deal has to pass through Congress before approval, which is likely why it has not yet been published. If things move quickly, people could expect to benefit within a year.

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