Read news from:
Austria
SHARE
COPY LINK
For members

TAXES

Self-employed in Spain: How to calculate your monthly social security fee

Self-employed people in Spain not only pay quarterly income tax, but after recent changes they now also have to pay a monthly social security contribution based on estimated income. Here's how to calculate it.

Published: 3 April 2023 16:44 CEST
Self-employed in Spain: How to calculate your monthly social security fee
Photo: Pixabay.

Being an autónomo (self-employed worker) in Spain can be a challenging existence. Whether it be the cripplingly high social security payments you have to pay every month, the complicated tax system, or the convoluted bureaucracy that’s involved, the life of an autónomo in Spain can be difficult.

Fully understanding Spain’s tax system is a minefield for most people, and for self-employed people who essentially have to become their own accountants, this is no exception. Whether it’s the complicated Spanish legalese of forms or other archaic elements which sadly are still prevalent in Spanish bureaucracy, bookkeeping in Spain takes up a lot of time and is far from user-friendly.

READ ALSO:

That somewhat explains why most autónomos in Spain end up paying a gestor, a type of accountant in this case, to navigate through the muddy waters of quarterly tax returns, VAT and so on.

Gestores are a first port of call in Spain for the endless bureaucratic processes that come with anything official here; intermediaries between you and the often-complicated government departments.

Monthly fee

For many autónomos in Spain, one of the most bothersome things about being self-employed is the monthly social security fee they have to pay. Not the principle of contributing to social security, but the fact that self-employed workers in Spain pay the highest monthly social security fees on the continent.

Add to that the fact that the system changed on January 1st 2023, making a complicated system even more complicated, and meaning that Spain’s autónomos now pay their 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.

READ ALSO: 

Calculating this monthly fee, as with most bureaucratic processes in Spain, can be a little tricky. Put simply, your social security contribution is now based on your estimated annual net income, but there’s all sorts of complications including a sliding scale that allows you to choose exactly how much (or how little) you want to put in, as well as a system that lets you update your income estimates to move between brackets.

Sound complicated? That’s why many people opt for a gestor, who handles it all for them.

But if you aren’t in a position to be able to afford a gestor, don’t worry. Spain’s Social Security system has created an online calculator tool that allows you to work out how much you should pay based on your estimated income, plus see the range of different monthly payments you could choose to make based on your contribution base.

You can find the calculator here, and The Local has put together a guide on how to use it. Note, you don’t have to login to the Agencia Tributaria website and identify yourself with your Cla@ve or digital pin, so you can play around with the calculator and get your estimates anonymously.

GUIDE: Self-employed in Spain: How to calculate your monthly fee

First up, you need to go to the contribution calculator on the Social Security website, which you can access here.

That link should take you to a page that looks like this:

Photo: Ministerio de Inclusión, Seguridad Social y Migraciones.

From there, scroll down to the ‘Elige un tramo‘ (choose a section) bar and a series of income thresholds will pop up, ranging from menos de 670€/mes (less than €670 per month) up to más de 6000€/mes (more than €6000 per month).

Choose what you expect your monthly income to be, and once you’ve selected an option you should get more information popping up directly below.

It outlines your contribution base, and should look like this:

Photo: Ministerio de Inclusión, Seguridad Social y Migraciones.

If you look beneath the ‘Elige tu cuota‘ (choose your quota) heading, you will see a sliding scale that allows you to move up and down and shows both your minimum and maximum monthly payments within your contribution base based on your income bracket, and how it affects your base.

Based on your income estimate, your monthly social security contribution will be somewhere between these two numbers after any possible deductions.

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.
For members

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
Updated: 19 May 2024 08:20 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.

READ ALSO:

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.

READ ALSO:

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.

READ ALSO:

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.

READ ALSO:

SHOW COMMENTS