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SELF-EMPLOYED

APPROVED: Spain’s new tax rates for the self-employed from 2023 onwards

Spain’s autónomos will pay monthly social security fees based on “real earnings” in a similar way to how it works for income tax, as approved by the Spanish Parliament on Thursday August 25th. Here’s a breakdown of the new rates and other key information.

spain new social security fees 2023
Self-employed people in Spain already pay the highest monthly social security fees in the EU. (Photo by JOSEPH EID / AFP)

After months of negotiations, Spain’s Social Security Ministry on July 20th was given the green light by self-employment groups ATA, UPTA and Uatae to change the way the country’s 3.3 million autónomos (self-employed workers) pay for social security coverage.

On August 25th, the Spanish Parliament approved the changes, thus confirming they will come into force in 2023.

Up until now, autónomos had a minimum contribution base of €294 a month after they’d been registered as self-employed for two years (for the first year it is €60 a month, and during the second year it rises progressively to reach €294, but this is also changing).

The changes mean that rather than there being a fixed minimum contribution base of €294, self-employed workers will pay different monthly amounts based on how much they earn. 

This is on top of IRPF, income tax, which they are also taxed on based on how much they earn in the form of tax brackets.

What this means in practice is that some seasoned autónomos will pay more for social security every month, whilst others pay less.

Instead of it being a fixed rate of €294, it will go from €200 a month for lower earners to €590 a month for higher earners.

The Social Security Ministry will also change these rates for each group of earners every year. 

So far they have disclosed what these rates will be for the years 2023, 2024 and 2025. 

The term “real earnings” (ingresos reales) refers to net income, the difference between computable earnings and deductible expenses.

There will now be 13 social security contribution brackets rather than just the one, from those earning under €670 a month to those earning above €6,000.

Below is a breakdown of these new minimum monthy contributions to the social security system based on real earnings for Spain’s autónomos. 

If there’s a brief conclusion to be drawn from this new system it is that self-employed workers in Spain who are low earners (anyone earning under €1,166 net a month) will benefit, especially those who are making under €900 a month as they stand to save up to €94 a month in social security fees by 2025. 

FIND OUT: Will you pay more under Spain’s new social security rates for self-employed?

Very high earners, anyone getting more than €4,000 net a month to give an example, will not be so happy as they could end up having to pay up to €300 more a month in social security fees.

But it’s perhaps the middle classes, the medium to high-medium earners that this legislation is particularly damaging for. For example, an autónomo who is starting to find success and earning €2,030 will end up paying €76 more a month by 2025. 

Many self-employed workers in Spain have long felt they are burdened with unfair tax and social security contributions in what’s already a difficult work market. 

This legislation will help autónomos who are struggling to get to the end of the month, but at first glance it appears that it will stump growth for startups and autónomos who are starting to get their businesses off the ground, financially speaking.

Self-employed people in Spain already pay the highest monthly social security fees in the EU.

They do however generally get more for what they pay, with benefits such as sick pay and maternity/paternity pay on top of access to Spain’s public healthcare system, benefits not always available to self-employed workers in other European countries.

Still having doubts about the new system? The link below should clear up any possible doubts.

Q&A: How will Spain’s new social security system for the self employed work?

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For members

WORKING IN SPAIN

How to understand your payslip in Spain

If you’re an employee for a company in Spain, each month you should receive a payslip from your employer, detailing how much you earn, deductions and plenty more. Here's how to read and understand your Spanish payslip properly.

How to understand your payslip in Spain

It can sometimes be confusing working for a company in another country. Even if you work in English, your payslip, or nómina as it’s called here, can be hard to understand.  

According to the salary platform EMT, more than 50 percent of people in Spain don’t know how to read everything on their payslip and don’t fully understand all the numbers on there.

It’s important to be able to understand everything about the amount you’re getting paid and what’s being deducted from that amount each month so that you can stay on top of your finances. Read on for our handy guide to help you out. 

There are essentially three sections to your payslip, which include the header, the middle section detailing your earnings and deductions and the footer, where you’ll see the rates applied for your calculations.

Here’s an example of what a nómina or Spanish payslip usually looks like. 

Header

According to Spanish law, each payslip must have a header that identifies both the worker and the company. It should include:

Information about the company
Name of the company
Registered office of the company
Tax Identification Code (NIF)
Social Security Registration number

Information about you (the employee)
Full name
Your DNI, NIE or TIE
Your social security number
Position with the company
Professional group
Seniority level
Date you started working for the company

Middle section 

Settlement period or Periodo de liquidación
A payslip is in fact similar to an invoice, so it should include a settlement period where it states the number of days worked for the payment being received. This is typically one month or 30 working days.

Revenues and expenses/accruals or Devengos
The revenues and expenses part of your payslip will state the gross amount of income that you have earned for a particular period worked. It will include your base salary, as well as bonuses and extra non-salary payments that are not taxed as part of your salary. These include compensation or payments for redundancy and must not exceed 30 percent of your salary payments.

Base salary or Salario base
Your base salary is the minimum amount you get each month. This will be at least €1,000 which is the minimum wage or SMI set for 2022, if you are working a full day of at least 40 hours per week.

This section will also include:

Supplements or Plus Convenio
This will detail any extra amounts received in relation to your work, such as extra shifts covered, working overtime and payments for extra training.

Extraordinary bonuses or Gratificaciones extraordinarias
If you work in sales, you may regularly get bonuses, but you may also get extra ones at Christmas for example. You may actually receive 14 payments but will receive them 12 times a year or once per month.

Remuneration
This part refers to extra payments to which income tax can be applied such as payments for private medical insurance, petrol for a company car or restaurant coupons to use when you’re working away.

Expenses
This refers the expenses you have incurred in order to carry out your job. It could be the cost of material or transportation if these have previously been agreed upon with your employer.

Social security and benefits or Prestaciones e indemnizaciones de la Seguridad Social
There may also be added benefits for suspensions or dismissals, as well as expenses assumed by the company, such as disability or unemployment benefits.

At the end of all of this, with everything added together, you will see your total gross salary. It’s important to remember though that this isn’t the amount you will get in your bank account each month as there will be several deductions to take into account first.

Deductions or Deducciones

This section of your payslip includes all amounts taken away from your total gross salary in relation to income tax and social security payments. These will include:

Social security or Seguridad Social

Your social security covers for healthcare, sick pay, accidents at work, maternity or paternity pay or temporary disability, and although your employer pays this, you will be responsible for paying 4.70 percent, which will be taken away from your total.

Unemployment or Desempleo
This is the amount that will cover you for potential unemployment or redundancy should the situation arise and varies according to the type of contract you have. It could be anything from 1.55 percent for a fixed-term contract to 1.60 percent for a full-time contract.

Overtime due to force majeure or Horas extraordinarias por fuerza mayor
This will include any extra hours that you worked involuntarily.

Overtime without force majeure or Horas extraordinarias sin fuerza mayor
These are the extra hours you worked voluntarily and can incur withholdings up to 4.7 percent.

Personal income tax or Impuesto sobre la renta de la personas físicas

Your income tax or IRPF will also be taken away from your total gross salary before it appears in your bank account. The percentage that you are charged will vary depending on how much you earn as well as your personal situation, your family (including if you’re married and have children) and the type of contract you have.

Salary advances or Salario Anticipo
If you are allowed to get any advances on your salary, this will also be reflected in your payslip and deducted here.

Value of products you received
This refers to the products and services you may get from your company received as wages, which are also subject to income tax.  

Other deductions
Other deductions on your income tax may include union payments or loan repayments for example.

After all of this is calculated, you will be able to know the actual amount that you should finally receive. If you need to question anything, you can refer to the footer section, which will state the specific rates applied for your calculations

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