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Unpaid interns in Spain must now register for social security and file tax returns

Spain's unpaid interns and those undertaking vocational training must, starting in 2024, register for social security and file quarterly tax returns, creating an administrative headache for universities across the country.

Published: 3 January 2024 09:11 CET
Unpaid interns in Spain must now register for social security and file tax returns
Interns must register for social security in Spain. Photo: ICSA / Pexels

Around 400,000 university students and 458,000 vocational training students who undertake internships in 2024 must contribute to social security for the first time starting at the beginning of this year.

In Spanish, this means they must cotizar. This verb means to make or pay contributions, in the sense of paying tax into Spain’s social security system (la seguridad social). There’s also the noun cotización used to refer to these social security contributions.

Even though interns must now register for social security, the government has promised to subsidise 100 percent of their contributions in 2024 during the student’s training period, so they will not have to pay the fees themselves.

Several regional administrations and universities have already cited problems with the new measure, however, arguing that it will be a bureaucratic nightmare. 

The procedure consists of registering and de-registering each student individually indicating the number of days per month that they will work or carry out their internships. This will be done quarterly by each region.

Universities warn that at the end of the year, this new burden could lead to the “collapse” of their administrative services due to the refusal of companies and institutions to assume the new procedure themselves.

The president of the Sectoral Committee on Student Affairs of Crue Universities, María Antonia Peña, explained at the end of the year that “many technical doubts” were still being resolved with the Social Security Treasury.

La Crue, an association that brings together the majority of Spanish universities estimates that there are some 400,000 internships undertaken each year in Spain and is concerned about processing this huge volume.

In many cases these internships are mandatory, meaning the student cannot graduate without having done them.

The regulations establish that companies and public and private institutions will be responsible for processing the contributions “unless agreements state otherwise.”

According to Peña, many companies are taking advantage of this phrase and leaving it up to the universities to do instead.

Over 458,000 vocational training students will also have to register for social security. These fees will be subsidised by 95 percent, with the Ministry of Education, Vocational Training and Sports paying the remaining 5 percent in 2024.

Many education ministers are also against the move. The Valencian Minister of Education, José Antonio Rovira said that the measure aims to “artificially raise Social Security affiliates” and creates more administrative work. 

While the Madrid Minister of Education, Science and University, Emilio Viciana, stated that the contribution “looks very good in terms of Social Security figures and statistics”, but that it was actually time to talk about youth unemployment instead. 

The Extremaduran Minister of Education, María Mercedes Vaquera, also regretted that Sánchez’s government had not accepted the proposal of fourteen communities to postpone the implementation of social security contributions for these students.

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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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