It is estimated that around one in 10 people in Spain get paid under the table and don’t pay taxes on their earnings.

In fact, stats show the underground economy represents about 15.8 percent of Spain’s GDP, but it could even be much higher.

It’s so common in Spain that there are in fact several different words in Spanish to describe it. These include ‘trabajar en negro’ (work in the black), ‘trabajar en b’ and ‘economía sumergida’ (submerged economy).

There are several reasons as to why the numbers of unregistered workers are so high here.

According to Spain’s Tax Technicians Union Gestha, sky-high unemployment and political corruption boosted the underground economy by €60 billion during the 2008 crisis and the years that followed, as the “morality” of struggling Spaniards vis-à-vis paying taxes was warped by the poor example set by the country’s leaders and countless graft scandals.

READ ALSO: Is Spain as corrupt as it was a decade ago?

Then there’s Spain’s maligned autónomo or self-employment system. There’s no threshold for earnings like there are in some other countries, so you are expected to pay tax and social security from the first €1 you earn.

According to the Spanish news site The Objective, around two-thirds of self-employed workers in Spain (around 2.2 million of the 3.1 million registered) earn below minimum wage. The SMI (Salario Mínimo Interprofesional) currently stands at €1,323 a month.

In 2018, Spain’s Social Security department issued a ruling stressing that everyone had to register as self-employed, regardless of the amount they earn, but it can be a challenge, particularly for low earners. 

For the first year of being self-employed, you’ll have to pay €60 a month in social security, plus taxes on earnings. After that, even if you’re only earning less than €670 per month, social security goes up to €225 in 2024.

That means you’re only left with €445 which you still have to pay tax on, hardly enough to live on in most places in Spain.

This goes someway to explaining why many just simply don’t declare their low earnings.

READ ALSO: Self-employed in Spain – Do I have to register and pay tax if I earn below minimum wage?

In other cases, working in the black is not actually something people willingly want. Often undocumented migrants end up having to work without being registered because they can’t get a work permit.

Furthermore, young people – foreign and Spanish – are commonly subject to exploitation in the workplace Spain. A survey by jobs portal Infojobs found that one in every three 16 to 24 year olds has admitted being paid at least once under the table over the past two years.

According to InfoJobs 14 of those who work under the table are in Andalusia, 29 percent of these don’t have a full education, 16 percent have completed ESO or secondary education, 11 percent have completed high school and the remaining 9 percent have university or higher education.

Regarding income level, workers who earn up to €1,000 are more likely to be paid under the table than anyone else – a total of 19 percent. These are followed by those who earn between €1,001 and €1,500 per month at 13 percent.

Being paid under the table is commonplace in many industries in Spain, and even socially acceptable in many cases. It mostly happens in the agricultural industry, as well as hospitality, but many other industries too.

For example, it’s very common for tradespeople to offer you one price if you pay in cash and a much higher price if you pay by card and have the job properly registered.

While it may save you a lot of money, there are risks to doing this, especially if the work is shoddy or something breaks soon afterwards, as there’s actually no official record of them have carried out the work.

Cleaners, child minders, gardeners and even carers are often paid under the table too. This is partly because they might not have enough work to register as self-employed, or because the people who employ them don’t want the extra financial burden of having to pay social security fees on their behalf.

READ ALSO – Tax evasion in Spain: What are the penalties and prison sentences?

Even though it may be socially acceptable, it doesn’t mean that the tax agency are lenient with tax avoiders. On the contrary, they crack down hard and issue huge fines.

In 2022, inspections on tax fraud increased by 8.8 percent. More than 2,300 were carried out and they have continued to step up efforts ever since.

In fact, 80 percent of Hacienda’s tax evasion team focuses on catching out individual autónomos or small businesses and only 20 percent focus on the ‘big fish’, despite the fact that according to The State of Tax Justice international report, Spain loses €6.3 billion a year from tax evasion committed by multinationals and big fortunes.

Fines for tax fraud (evasión fiscal) in Spain go from €1,500 for minor amounts up to 50-100 percent of the amount you didn’t declare. 

For even larger amounts above €120,000, you could even be jailed.

It’s worth keeping in mind that Spain is still 1.5 percent below the EU average when it comes to its submerged economy, which is boosted by countries such as Italy and Greece, which are much worse than Spain.