From January 1st 2023, all workers in Spain, whether salaried or self-employed, must pay a new tax through their social security contribution to help fill up Spain's pension fund - a move that will affect over 20 million workers.
The Intergenerational Equity Mechanism (MEI), as it's known, will be a small social security contribution intended to help balance pension financing between generations.
With Spain's rapidly ageing population, declining birth rates, high levels of unemployment, the impending retirement of the baby boom generation and seriously scarce pension reserve funds, the Spanish state needs to recoup pension funds quickly in order to ensure the costs of future retirees.
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It is hoped that the MEI will bring in around €22 billion by 2032, when it is anticipated the new tax will be lifted.
How much will the MEI tax be for contract workers?
The new MEI tax will be paid by all workers regardless of their income, and the percentage they pay on their salary will be the same for everyone.
In simple terms, if you work in Spain and thus contribute to social security, the new tax will represent 0.6 percent of your monthly salary.
However, of this 0.6 percent your employer will pay 0.5 percent and you will only pay the other 0.1 percent.
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To give an example: say you're employed in Spain and have a gross salary of €2,000 a month; 0.6 percent of €2,000 equals €12, of which your employer pays €10 (0.5 percent) and you would pay €2 per month (0.1 percent).
How much will the MEI tax be for self-employed workers in Spain?
What about if you're self-employed a don't earn a fixed monthly wage?
Autónomos will also have to pay this new tax, and trade unions estimate that the average monthly payment for self-employed workers will be around €5 per month.
It is unclear exactly self-employed workers will pay the tax - whether on their quarterly tax return or in the monthly autónomo fee - but Spanish media reports seem to suggest it will most likely be tacked on to the monthly fee.
READ ALSO: Self-employed in Spain: Do I have to register and pay tax if I earn below minimum wage?
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