Autónomo: What we know about Spain’s plan to change freelance contributions

Earlier this week came news of a development that had many freelancers in Spain if not jumping for joy exactly then at least muttering under their breath “about time”.

Autónomo: What we know about Spain’s plan to change freelance contributions
Photo: Scott Graham/Unsplash

According to reports this week, the Spanish government is preparing to overhaul the way social security contributions were paid and take into account their actual earnings rather than a fixed monthly amount regardless of the true income.  

What needs changing?

It has long been a gripe of those registered as “autónomos” – the term for self-employed workers in Spain – that the system of paying into social security involves a “tarifa plana” or flat fee that currently stands at around €283 a month at the minimum rate.

The fee gives access to Spain's public health system among other welfare benefits including contributions towards a state pension but has to be paid regardless of whether an autónomo has any monthly earnings, and on top of other taxes.

In fact self-employed workers in Spain currently pay the highest monthly social security fees in the EU which are 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.

Under the current system freelancers get to choose the contribution base that they want to pay a rate on and not surprisingly 85 percent of Spain’s freelance workforce opts for the minimum contribution base.

This system is seen to penalize those on a low income while allowing those who are doing well and earning more to get away with contributing more.  Basically, your contribution would be the same whether you earned €20,000 a year or €200,000.


Home office in Sella on the Spain's Costa Blanca. Photo by Euan Cameron on Unsplash


So what are the new proposals?

It seems that the new plans consist of establishing income brackets to set the level of contributions meaning the more you earn then the more social security contribution you pay. It broadly follows the system used to establish how much income tax is paid.

Introducing a mantatory system that sees to link contribution to proportion of earnings rather than a flat minimum rate will mean that when self-employed workers see a reduced income, their social security contributions will drop and when they earn more, they will pay more.  

Cadena Ser which broke the story said the Social Security Ministry and Tax Agency were sharing data to come up with a new system but that nothing specific had been decided yet.

An overhaul in the system would mean that the freelance workforce would be entitled to better benefits down the line. Increasing pension contributions based on actual income rather than the minimum opted by the majority means a bigger state pension when the time comes.

The report suggested the government was looking at a system that would set €12,000 as a minimum base with discounts of up to 50 percent on contributions from those who don’t reach that threshold with the next bracket for those earning between 12,000 and 25,000 a year contributing the same as the current minimum base with another five brackets beyond that.

Who will it affect and how?

There are 3.2 million self-employed people in Spain, around 16 percent of the country's working population. 

This may seem like a large amount for a nation that isn't famed for its entrepreneurial spirit, but it's more a product of a dire labour market for salaried employees than a consequence of advantageous conditions for autónomos.

For what we know so far it seems that for those who earn up to €25,000 it’s unlikely to change their monthly contributions unless they are earning below €12,000 when they may be able to get discounts on their monthly contributions.

Those who earn over €25,000 will likely see their monthly payments increase.

The new system hasn’t been designed just with the lowly paid freelance in mind. It has been calculated that creating a compulsory tier system could see a rise of 20 percent of contributions.

What are people saying?

The move is controversial with critics railing against the introduction of any change which could see higher monthly payments for those trying to keep afloat in during the coronavirus crisis.  

“This is not the right time, the self-employed are suffocating,” said Lorenzo Amor, the president of the self-employed workers association ATA, who argued that lowering monthly fees would be helpful but not raising them.  

However, it was welcomed by others.

“We celebrate the fact that a government is doing something about one of the sector’s longstanding demands, which is a protection system based on solidarity. It is important to come out of our state of precariousness and firmly join the welfare state, and this is a fundamental step toward that,” María José Landaburu, secretary general of UATAE which also represents freelancers, told El Pais.

When will it be introduced? 

Beyond the leaked reports, at the moment there is no official word on when we can expect to see the changes and confirmation from relevant ministries only goes so far as to say a proposal is on the cards but no details are forthcoming.  




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Why does my salary vary between months in Spain if I’m a contract employee?

If you’re employed by a company in Spain, you may have noticed that what you get paid each month is sometimes higher and other times lower. Here's why this happens and how you can understand it better.

Why does my salary vary between months in Spain if I'm a contract employee?

Many asalariados (salaried employees) across Spain will have noticed that their wages at the beginning of 2022 may have been lower than that net salary they received at the end of 2021.

This is in fact usually not down to error, but comes as a result of your company withholding a higher amount of personal income tax (IRPF) at the start of the year, resulting in you getting paid less.

Companies in Spain are obliged to withhold a certain percentage of your salary called IRPF (Impuesto sobre la Renta de las Personas Físicas).

This, in turn, gets passed on to Spain’s Hacienda tax agency. Your gross salary and personal circumstances mean that the income tax withheld will vary.

Your employer will calculate the amount of your gross salary you must pay to the Treasury as personal income tax and will deduct it from your payroll month by month. This can be done between the 12 or 14 salary payments per year.

Alternatively, a lower percentage of tax may be applied in the first months of the year, which is then adjusted by raising it in the final few months of the year, or vice versa, which is why fluctuations can occur.

You should keep in mind that if at the beginning of the year you received a raise, had a baby or opened a pension plan, it may mean that the tax withheld from your company will go up or down. Having a new baby for example gives you a reduction.  

What if I believe there is an error in my IRPF calculations?

If you still believe there is an error, this can be rectified whilst filing your annual income tax return – la declaración de la renta – which you should each year between April and June.

READ ALSO – La Renta: The important income tax deadlines in Spain in 2022

If you receive an annual gross salary of less than €22,000, you are not required to fill out an annual tax declaration, but may want to do so if you believe that your employer has been deducting too much tax. If the error is found in your favour, Spain’s tax agency will return your overpaid tax.

How can I find out how much tax will be deducted in advance?

If you want to be prepared and find out exactly how much tax your company will deduct from your salary each month, you can fill out this tax calculator for 2022 found on the Hacienda website. This will let you know exactly how much IRPF should be deducted from your wage, depending on your personal circumstances. 

Your employer may also ask you to fill out the form Modelo 145 to help them work out how much tax you should pay.

The form will ask you for your current personal situation such as marital status, if you have children or other dependents. Depending on the outcome of this, you may get further discounts on the amount of tax that is withheld.