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WORKING IN SPAIN

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

Spain’s autónomos will soon pay monthly social security fees based on how much they earn, instead of a fixed rate, the Spanish government has confirmed. So will you end up paying more or less?

Will you pay more under Spain's new social security rates for self-employed?
Will you pay more or less in social security fees? Photo: Bench Accounting / Unsplash

Autónomos or the self-employed in Spain have it tough, having to pay one of the highest social security contributions in Europe, on top of income tax. However, this is all about to change. For some it will mean they will end up paying less in social security fees, but for others it will mean paying considerably more, making the situation even tougher.

Currently, autónomos have 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.

For the first year, they will pay €60 a month, and during the second year it rises progressively to reach €294.

But this is all set to change because on July 20th, the government confirmed that after months of negotiations, they had come to a final agreement with self-employment groups ATA, UPTA and Uatae.

READ ALSO – CONFIRMED: Spain’s new tax rates for the self-employed from 2023 onwards

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.

Spain’s Ministry of Employment and Social Security will also change the rates for each group of earners every year. So far they have revealed what these rates will be for the years 2023, 2024 and 2025. 

Find out below if this means that you will be paying more or less in social security fees from next year.

Essentially this shows that anyone earning under €1,300 per month will be paying less in social security fees, with those earning €1166.70 to €1,300 a month paying just €3 less than they do now.

Those earning between €1,300 and €1,700 will pay the same amount as they do now – €294 per month, while anyone earning over €1,700 will be paying more.

According to the government, of the three million self-employed workers in Spain 2.4 million earn under €1,700 per month, meaning that the majority will see their social security contributions staying the same or reduced.

They say that these changes will benefit two out of every three self-employed people in Spain.

While this is of course good news, it’s the mid to high earners who will be affected by the changes the most.

High earners, those earning €4,000 per month will have to pay out €300 or more in social security fees, but it’s mid earners that will end up being the worst off.

For example, an autónomo who is just starting to be financially stable and earning €2,030 per month will end up paying €390 per month by 2025, which is €76 more than they currently pay.

It means that autónomos may not want to take on more work for fear that it will push them over the threshold and they’ll have to pay more in fees and it may also encourage more people to be paid under the table, referred to as ‘trabajo en negro‘ or ‘working in the black’ in Spain.

Self-employed in Spain already pay some of the highest contributions in Europe

Many self-employed people in Spain already believe the system is unfair because they pay a lot more in social security contributions than their European neighbours, and many are now set to pay even more.

In Germany for example, a self-employed worker with a monthly income of less than €1,700 pays nothing. Anyone earning over this amount pays a fee of €170.

In the UK, national insurance contributions start at £3.05 a week, or £158.60 a year. Those earning over £9,568 will pay 9 percent on profits up to £50,270 and 2 percent more on profits after that.

More benefits

While those in Spain do end up paying more, they also gain more too. Health care, sick pay, maternity and paternity benefits and pensions are all available to self-employed workers here.

This is not the case in many other European countries, who may have to pay extra for health insurance or do not get any maternity or paternity benefits if they’re self-employed.

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For members

TAXES

How does Spain know if I’m a tax resident?

Taxation in Spain can be quite a tricky subject and many people are often confused as to whether they are liable to pay tax here or not. How does Spain actually know if you’re a tax resident and how can you prove one way or another?

How does Spain know if I'm a tax resident?

Sometimes taxation is not very straightforward. You may work in one country but live in another, or you may live in a different country to your family. In these cases, how does Spain know if you’re a tax resident or not?

According to the law 35/2006, the Spanish Tax Agency considers anyone to be a tax resident if they:

  • They live in Spain for 183 days or more a year
  • Their main economic interests are located in Spain
  • Their spouse and children live in Spain

Living in Spain for more than 183 days

You may own a property in Spain, but actually only live in it for part of the year. If the amount of time you live in the property is less than 183 days in one year, then it’s likely that Spain won’t consider you to be a tax resident, provided you don’t meet one of the other two criteria above.

Similarly, you may only be basing yourself temporarily in Spain to learn Spanish or to enjoy the weather. In these scenarios, as long as you’re not in the country for 183 days or more, you probably won’t be classed as a tax resident.

Remember that if you’re not an EU citizen, you can only legally stay in Spain for 90 days out of every 180 days, so it’s unlikely that you will meet the 183-day rule.

Keep in mind that these days don’t have to be consecutive. It could be any of the 183 days or more from January to December in a given year. Be aware, that short weekend trips away do not count as days not spent living in Spain.

There are various ways the Spanish authorities can find out how long you’ve been in the country. The first is obviously at immigration when you enter and leave the country. If you’re from a non-EU country your passport will be stamped upon both entry and exit, showing how much time you’ve spent here.

If you enter Spain via other means, such as by road, it’s not so easy for the authorities to know how long you’ve been in the country as checks are not always carried out at the borders.

However, there are other ways the authorities can tell if you’re in the country and how long you’ve been here. For example, when you stay in a hotel or an Airbnb, your passport details will be registered. If you try to rent a property, again your details will be registered.

In fact in Spain your details will be registered when you try to do many everyday life tasks such here as signing up for internet, buying new furniture or receiving packages bought online.

Some people may claim to be a non-tax resident, but try and live in their second home for longer than 183 days. In this case, the tax authorities may turn to the energy companies and look at your bills to see when the property has been in use.

Yes, you can obviously rent your property out and the bills will show the property has been lived in, but in this case, you will be expected to pay tax on the rental income, whether you’re a resident or a non-resident.

Your main economic interests are located in Spain

What does it mean if your main economic interests are in Spain? For example, if all your assets are located in Spain such as real estate, your main bank account and other investments, you may be considered to be a tax resident.

If you work in different locations around the world, but the headquarters of your business are based in Spain or your employer is in Spain, then it’s likely that you would also be liable to pay tax here. Even if you don’t live in Spain for more than 183 days a year in this case, you could also be considered to be a tax resident.

This is relatively easy for the authorities to find out where your place of work and main assets are located. 

Your spouse and children live in Spain

Even if you don’t live in Spain for more than 183 days a year, but you are not divorced or separated from your spouse and they live in Spain, along with your children, then the Spanish authorities may also consider you to be a tax resident. This will most likely be the case if they depend on you financially.  

For example, you could work abroad in another country, but your husband/wife and kids live in Spain – they’re registered here and your kids go to school here and they depend on your paycheck for household bills. In this case, when finding out if you’re a tax resident or not, the tax authorities may ask questions about your family and you may have to provide documents proving where they live. 

How do I prove I am not a tax resident in Spain?

If you don’t think that any of the above situations apply to you, but are still worried about being considered a tax resident in Spain, then the best way to prove that you’re not is to get a tax residency certificate from your home country stating that you reside and pay tax there. This way, you cannot be taxed in both countries, if they have a double taxation agreement.

Be aware, this certificate only lasts for one year, so you will need to get a new one the following year if the same situation still applies. 

If you do live in Spain for more than 183 days, however, it’s very unlikely that you will be able to get this certificate from your home country. 

  • Keep in mind that we at The Local Spain are not tax experts, we have learned the hard way by asking professionals, reading the laws and getting on the phone to speak to the experts. If your situation is not straightforward then we recommend contacting a lawyer to help you figure out your particular situation. 
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