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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”.

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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

READER QUESTIONS

Do I have to do Spain’s annual tax declaration if I arrived recently?

There’s less than a month left to file Spain’s annual tax return, so where do new arrivals stand regarding this? Are they already tax residents? What if they didn’t work in Spain last year and only arrived in 2024?

Published: 12 June 2024 16:17 CEST
Do I have to do Spain's annual tax declaration if I arrived recently?

The Spanish tax system can seem a little complicated at times. This is especially true if you’ve just arrived in the country and don’t speak the language.

A common question among newcomers to Spain is whether or not you’ll need to do an annual tax declaration if you recently arrived in the country.

The Local has covered the tax declaration, known simply as la renta in Spanish, in considerable detail before. You can find our collection of tax articles here. 

But do you have to do Spain’s annual tax declaration if you arrived recently?

The Local Spain spoke to lawyer Maryem Essadik, CEO of Spain-based Marfour International Law Firm, to find out more. 

Do people who have recently arrived in Spain have to file an income tax return?

“It depends on your status as a tax resident or non-resident in Spain, which will be determined based on the requirements provided for in Article 9 of Law 35/2006, of November 28, on Personal Income Tax (LIRPF). 

“If considered a tax resident, that person will be required to submit a Personal Income Tax return, provided that they obtain the minimum amounts to be required to submit it.”

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Spanish tax residence begins after 183 days in the country. Are there any circumstances in which a person who has recently arrived in Spain (less than 183 days) has to do it?

“If a person stays less than 183 days in Spain during the fiscal year, they will generally be considered a non-tax resident in Spain, and it must be taken into account that “sporadic absences” abroad could be part of said calculation, in accordance with Article 9 of the LIRPF. 

“Additionally, a person may be considered a tax resident in Spain (even if they do not remain in Spanish territory for more than 183 days during the fiscal year) if their base of activities or centre of economic interests is located in Spain, or when your family are considered tax residents in Spain, unless the opposite is duly proven.

“The person who is considered a non-tax resident will only pay tax in Spain on the Spanish-source income obtained during the corresponding fiscal year. 

“Your obligation to file an income tax return will depend on the type of income obtained and whether the payer has applied and paid the corresponding withholding/payment on account, to the extent that they are required to do so.”

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Keeping in mind that the 2024 Declaración de la Renta applies to the previous year, would they have to pay taxes in Spain for their 2023 income if for example they arrived in March 2024?

On the basis that in 2023 that person did not reside in Spain, in principle they would be considered a tax non-resident in said country. 

Therefore, as mentioned, they should only be taxed in Spain in 2023 if they obtain any income from a Spanish source.

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