EXPLAINER: Spain’s new rules for autonomo payments for the self-employed from 2023

Spain’s autonomos (self-employed) will soon pay monthly social security fees based on ‘real earnings’ in a similar way that people pay income tax.

Newly self-employed

For newly self-employed and  self-employed workers under 35 years of age the new flat rates of autonomo payments are:

• First 12 months: contribution of 60 euros (80% reduction on the base contribution).
• Months 13 to 18: contribution of 146.97 euros (50 per cent reduction).
• Months 19 to 24: payment of 205.76 euros (30 per cent reduction).

The flat rate for the self-employed is a measure to promote self-employment that consists of paying a reduced monthly Social Security contribution as a self-employed person for two years.

It is a very attractive rebate that greatly reduces the cost of registering as self-employed for the first time and has since helped more than one million new self-employed people to take their first steps.

Self- employed who have been autonomo for two years or more

After 10 long months of negotiations, Escriva has signed a pact with self-employed associations and trade unions for the reform.

Jose Luis Escriva Belmonte is a Spanish economist currently serving as minister of Inclusion, Social Security and Migration within the Second Cabinet of Pedro Sanchez.

According to trade union sources, Escriva has signed a pact with self-employed associations and trade unions for the reform of the RETA, the Special Regime for Self-Employed Workers, which sets the contributions of self-employed workers for the next three years.

It can be summarised as follows: from the current minimum fixed payment of €294, a progressive system of 13 instalments, depending on income, will be introduced over 9 years.

This means that in 2031 the self-employed payments could vary between €184 and €1,267 euros depending on the amount of income.

How much will you pay in autonomo?

Below is a table showing how the contributions will vary depending on the amount of income:

However, the Ministry points out that there are still some details to be worked out before the agreement can be finalised.

Here are a couple of pros and cons to the reform:-

Reasons in favour of the reform of the self-employed contribution system

• A progressive system is fair: whoever earns more, pays more. The same as with personal income tax or social security for employees.
• There have been calls for years to bring the self-employed tax implications in line with real income.
• The fixed minimum autonomo system is an outdated and unfair system. It makes no sense for a self-employed person earning €500 to pay the same contribution as someone earning €4,000.
• It will improve social protection for the self-employed: the average pension for the self-employed is 59.4 per cent of that received by workers in the general scheme, €794 compared to €1,338. Sick leave benefits are also much lower. This is because 85 per cent of the self-employed pay contributions at the minimum rate. Although there is the option to contribute more, very few do so. So a rise seems reasonable.
• A reduction of contribution for those who earn the least: according to the government, two-thirds of the self-employed will benefit. In practice, it will be those earning €900 or less.
• The flexibility to adapt the contribution throughout the year: the possibility of modifying the amount 6 times during the year is contemplated in order to adapt it to the income you have throughout the year.

Reasons against the reform of the self-employed system

• The new rules could mean the departure of high-earning self-employed workers to countries with lower tax laws: especially those who can work remotely. Places like Andorra, Gibraltar, Estonia or the United Kingdom will be more attractive for tax reasons.
• Unemployment for the self-employed is not covered unless the self-employed are prepared to make an additional payment for this.
• The problem is that the “risk premium” involved in entrepreneurship is not valued. There is the uncertainty of income, more stress, constant reinvention, longer working hours and fewer holidays, as reflected in the National Study of the Self-Employed (ENA).
• In reality, being autonomo is very different from working in the civil service or being a long-serving salaried worker, as they have collective agreements or three-year contracts.
• It will encourage the underground economy: among those who earn the most because they will try to contain their income so as not to jump from one bracket to another.