ANALYSIS: Why Spain must fix its ‘unfair’ tax system for self-employed workers

Is the strange world of Spain's tax system for freelancers about to be made better or worse? Graham Keeley, one of those many foreign workers in Spain embroiled in the scheme, explores the issue.

ANALYSIS: Why Spain must fix its 'unfair' tax system for self-employed workers
Photo: Avi Richards/Unsplash

If you have moved to Spain for work, the chances are that you may have entered the strange world of the autonomo, otherwise known as the self-employed.

One in ten self-employed workers in Spain is from abroad or about 175,000 of the total autonomo population, according to 2019 data from the National Statistics Institute.

Indeed, foreign residents here are registering as self-employed at five times the rate of Spaniards, which shows that foreigners prefer to be in charge of their own destinies. 

But, hold on a minute, why is it such a 'strange world'?

Well, ponder this for a moment; under the Spanish system you can choose how much you pay towards the social security system  every month.

That, in itself, struck me as strange when I entered the system, way back when.

Javier Díaz, an economist at the IESE Business School, was more forthright.

“What kind of tax system is it where you choose how much you want to pay? Spain has the strangest tax system in the world,” he said.

What it means in practical terms is most people choose to pay the lowest rate which still brings access to the health system and a pension in the future.

However, what you quickly realise is that even if you pay the bottom rate, the system itself does not work in your favour.

Why? Well, you pay a tarifa plana – or flat rate – regardless of how much you earn.

So even if you are earning less than €20,000 a month you pay the same as a freelancer who is taking home €200,000 per year.

Worse still, this minimum rate was raised about two years ago to about €285 a month. I should know, I am paying it.


Just to put it into perspective, working as a freelance in Spain puts you at a major disadvantage compared to doing the same job, elsewhere in Europe.

According to a report by the Circulo de Empresarios, a business group, in comparison with Spain, self-employed workers in the UK pay the equivalent of €14 per month (for the minimum fee) while in the Netherlands the charge is €50 a year and in the fee in Germany is €140 for those earning more than €1,700 a month.

Now, Spain's left-wing government wants to reform the social security payments for freelancers, so the payments reflect what people actually earn.

For many foreigners and Spaniards alike, the self-employed represent about 16 per cent of the workforce so they are a substantial lobbying group.

More importantly, perhaps, in the wake of the economic ravages caused by the Covid-19 pandemic, they have been one of the groups which have suffered most.

As thousands of companies have nosedived since coronavirus arrived, so have the freelancers who work for them.

In essence, the proposal by the Social Security ministry and the tax office is that payments will vary according to what you earn under a new mandatory system. The idea is to make it more like the income tax system.

For Alyssa McMurtry, a freelance writer from Oviedo, it could not come soon enough. She is no fan of the current system.

“It sucks. The flat rate is totally discriminatory to those who make less. Yes it is for benefits but some people don't have the luxury to think about their pension when they are making €900 per month but paying €300 just to work plus other taxes,” she said.

She is not alone. Changing the system for the self-employed has been a long-standing demand by associations which represent this sector.

The move is part of a wider push by Unidas Podemos (UP), the far-left party which is the junior partner in the coalition, to make the tax system fairer.

It is no surprise, then, that José Luis Escriva, the social security minister, is a senior figure in Unidas Podemos.

The party has long said it wants to raise taxes for listed companies and the richest in society. Removing an unfair tax for those earning less would also seem to make sense.

Associations representing the self-employed are divided over the proposed reforms.

Lorenzo Amor, president of the self-employed workers association ATA, is opposed to changing the system because he believes it could mean some freelancers who are currently paying the lowest grade, end up paying higher amounts.

The Spanish economy is expected to implode by 11.2 per cent this year, meaning life is not going to get easier in the short run for anyone. 

Imposing more complicated tax reforms right now might worsen freelancers' already difficult situation, said Mr Amor recently.

“This is not the right time, and the self-employed are really struggling,” he told El País newspaper.

However, two other associations, the UATAE and the UPTA, support the government initiative.

“The current system is unfair, since those with lower incomes are harmed, as they have to make a contributive effort that is above their possibilities,” said Eduardo Abad, president of UPTA.

So what is the right course for the self-employed?

Undoubtedly, the present system is unfair and should be changed.

It is hard enough to be a freelancer in any field right now but it makes things even tougher if you are paying the same in social security as someone earning much more than yourself.

However, what matters is that the state gets this right and does not make a hash of it so the self-employed are forced to navigate yet more chambers in the already labyrinthine bureaucracy.



Graham Keeley is a Spain-based freelance journalist who covered the country for The Times from 2008 to 2019. Follow him on Twitter @grahamkeeley





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Do I have to take most of my annual leave in August in Spain?

Many Spanish companies still expect their workers to take their holidays at specific times of the year, primarily in August, right in the height of summer when many hotels are fully booked. So what are your rights, are you obliged to take your vacation in one particular month?

Do I have to take most of my annual leave in August in Spain?

While it’s your right as an employee to be able to take holiday days, do you have to take them when your company wants you to take them, or are you able to choose and have more flexibility?

Despite August being one of the hottest months in Spain and the one month of the year when many official companies and offices shut up shop, not everyone necessarily wants to take their break at the same time as everyone else.

Taking your holidays in August means less availability in hotels, overcrowding and more expensive transport and accommodation. If you don’t have children who are off from school during the summer months, then you may wish to take your vacation days at another time of the year, when it’s less busy and cheaper.

To answer the question it’s important to know the details about what the law says about how paid time off is taken, requested, imposed, or granted.

What laws or regulations dictate the rules about paid holiday time?

There are three different sets of rules and regulations, which are responsible for regulating the laws on vacation time in Spain. 

Firstly, you need to look at the Spanish Workers’ Statute, which includes rights, duties and obligations applicable to all salaried workers in Spain.

Secondly, you need to be aware of the collective sector and/or company agreements, which may dictate the rules for a particular industry for example.

Thirdly, you need to look at the contract, which you signed with your employer when you started working for them. This sets out your individual circumstances and the rules you must abide by.   

Workers Statute

As a general rule, all employees are subject to the Workers’ Statute. Holidays are part of this and are the subject of article 38. These conditions can never be contradicted by individual companies and are set as a guaranteed minimum. 

The minimum number of holidays in Spain is 30 calendar days per year. This equals two and a half days per month worked, in the case of temporary contracts. The statute states that vacations must be taken between January 1st and December 31st in separate periods, but one of them must be for at least two weeks. They are always paid and cannot be exchanged for financial compensation.

The period when you can take them is set by a common agreement between the employer and the worker, in accordance with what is established in the collective agreements on annual vacation planning. If there is disagreement, the social jurisdiction is resorted to.

At a minimum, the company must offer vacation days at least two months before the beginning of the holiday period, so that the employee has time to organise and book.   

When the planned time to take vacations coincides with a temporary disability, pregnancy, or childbirth, you have the right to enjoy the vacations at another time, even after the calendar year is over.

Collective agreements on vacations  

Your sector’s collective agreements may also help to answer this question. These aim to improve upon the basic and general rights that are included in the Workers’ Statute. They seek to adapt the rules to each type of industry or company. They could, for example, set out extra vacation days, which are greater than the standard 30 calendar days. 

You will need to find out what your specific sector or company’s collective agreement is. There is a possibility that your sector or company has mandatory summer vacations for the month of August and in that case, you can choose vacation dates, but only within this month.

Your work contract 

Lastly, you will need to consult your individual contract which you signed with the company when you were hired.  As well as the minimum conditions set out in the Workers’ Statute, your contract sets out your particular agreement with your employer in terms of holiday duration, the work calendar and other details.

Therefore, you should state in your contract whether you have to take your holidays during August, or if you’re free to take them at other times of the year.

If after consulting these three sets of regulations and there are still in doubt or in disagreement with your company about vacations, such as having to take them during the month of August, you should consult a lawyer specialising in labor law. They should be able to give you an answer specific to your situation.  

Can I appeal or disagree and what are the consequences? 

To appeal or express disagreement with what is proposed by the company, there is a period of 20 business days from when the vacation schedule is sent out, after which time you don’t have the right to show that you disagree.  

Companies can proceed to disciplinary dismissals due to abandonment of the job if you decide to take vacations that have not been granted or agreed upon with your employer. To avoid this type of problem, always make sure you have a record in writing of your request for vacation time and subsequent approval by the company.