Why Spain’s self-employed are set to receive much better pensions

One of the benefits of the recently announced tax hike for self-employed workers in Spain is that they will finally receive the same monthly pension as contracted employees.

Why Spain's self-employed are set to receive much better pensions
Photo: Alexas Photo/Pixabay

Spain’s self-employed have a pretty tough gig.

We’ve covered it in detail before in the link below, but the challenges include everything from the highest flat self-employed fee in the EU to plenty of convoluted bureaucracy.

Self-employed in Spain: What you should know about being 'autónomo'

Fortunately, one of the main downsides of being autónomo in Spain is now set to be resolved as a result of the government’s recent changes to the contributions for this group of workers.

In return for paying €144.49 more a month to Spain’s social security system on their net income, they will receive €377.92 more per month in their future pensions.

But it does mean that if they contribute (cotizar) on their net earnings, many will go from paying €288.99 a month to €433.48.

The threshold to calculate this are earnings of €1,416.60 a month, which is 1.5 times the current minimum contribution base.

Spain’s social security ministry will adjust the new way of calculating contributions based on self-employed worker’s net earnings (ingresos reales), so some will pay less but most will contribute more.

This means that autónomos will overall pay 50 percent more than they currently do to RETA (Spain’s Special Regime for self-employed workers), adding €5 billion more to public coffers every year.

In 2019, retired self-employed people in Spain received an average €686 monthly pension whereas the average for retirees who were on the payroll was €1,091.

The numbers fluctuate year to year but in general the gap between both groups has been widening.

The argument by Spain's version of Inland Revenue up until now has been that 86 percent of autónomos in Spain pay the minimum monthly social security contributions during their working life.

Even the OECD has had to step in to warn the Spanish government that as things stand, there will be an army of old people in twenty years' time struggling to make ends meet.

The new autónomo rules, which are yet to be written in law, are expected to come into force in 2022.

Although these latest measures may offer some sense of security for the future for many self-employed workers in Spain, others may find it a hard pill to swallow given that their earnings have dropped considerably during the pandemic and that they still have to pay a flat fee of €289 a month, a fee that’s high enough already for some.


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


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Everything that changes for self-employed people in Spain this year

New social security contributions, a tax to top up pension funds, a reduction in retention rates for artists - 2023 will bring many developments for all self-employed workers in Spain.

Everything that changes for self-employed people in Spain this year

New social security contributions for self-employed

From 2023, Spain’s autónomos will pay monthly social security fees based on how much they earn, instead of a fixed rate. Previously, freelancers have had to pay a minimum contribution base of €294 per month after they have been registered as self-employed for two years, regardless of how much they earn.

Instead of there being a fixed rate of €294, the fee will go down progressively to €200 a month for lower earners and progressively higher – up to €590 a month – for higher earners. This means that some self-employed workers will see their social security payments reduced, however, for anyone earning over €1,700 per month, they will increase.

New tax for all workers 

From 2023, all workers, whether self-employed or salaried in Spain will have to pay an extra tax to help fill up the country’s pension fund. Trade unions estimate that for autónomos, the average monthly payment will be around €5.

READ ALSO: Everything that changes about working in Spain in 2023

No social security tax for new autónomos in Madrid

Back in September 2022, the regional government in Madrid announced that from 2023, new autónomos in Madrid will have their social security fees paid for by the local government for their first year of self-employed work in the region.

If their monthly earnings are below minimum wage in the second year (€1,166 gross a month), they will also have their social security fees covered by the regional government. This means that new self-employed workers in Madrid will save hundreds or potentially several thousands of euros during their first year or two years of work.

READ ALSO: The tax changes in Spain in 2023 that you need to know about

Benefits for self-employed mothers

Women who are self-employed and have children under 3 years of age will receive a benefit of €100 per month until the child has their third birthday. 

To be eligible, at the time of giving birth, they must either be receiving a benefit or subsidy for unemployment or be registered with Social Security. Women who register later and have already accumulated at least 30 days of contributions will also be eligible. 

READ ALSO: How to hire someone if you’re self-employed in Spain

Reduction in retention rates for artists 

The withholding rate or IRPF for artists with the lowest level of income will be reduced to 7 percent. Previously, it was only 7 percent for the first couple of years of being an autónomo and from then on it went up to 15 percent. 

Changes for unpaid/late invoices  

As a freelancer, it’s unfortunately likely that you’ve been in a situation where you’ve had unpaid or late invoices and you’ve still had to pay tax on them, without having actually received the money yet. You then only had a limited amount of time in which to modify or change your invoice to reflect the fact that it hadn’t been paid. 

This situation is set to get easier in 2023 as the period in which you can rectify your invoice has been extended from 3 to 6 months. The methods used to claim payments have also been made more flexible and the minimum amount of the tax base that can be modified has been lowered from €300 to €50.

The threshold for tax declarations changes

In 2023 self-employed taxpayers whose gross income does not exceed €15,000 per year will not be required to file their yearly 2022 tax return. 

This means that in April when it’s time to file the Declaración de Renta, those who have earned income from more than one source will not be obliged to declare if the sum of all their income does not exceed €15,000. Previously, the threshold was €14,000.