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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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TAX

EXPLAINED: What are Spain’s new regional tax breaks?

Seven Spanish regions have announced tax breaks which act as an extra benefit to the income tax reductions announced by the national government recently. Read on to find out what they are and how they could help you save.

EXPLAINED: What are Spain's new regional tax breaks?

With Spain gearing up for local elections in May 2023 and a general election expected at the end of next year, regional governments and the left-wing national government are immersed in a tax war to sway the voting balance in their favour, with the official message being to help people across the country deal with the consequences of inflation and the rising energy and daily costs.

The biggest news so far has been that the national government has decided to reduce the income tax of people earning up to €21,000 ($20,200) per year, while introducing a new “solidarity tax” for those with more than €3 million.

READ MORE: How much will you save with Spain’s national income tax cut?

Spain’s Personal Income Tax (IRPF) is a state tax, but half of its collection is controlled by the autonomous communities.

As such, each region can change its income tax brackets and the reductions will apply to the 50 percent of IRPF collected by the regional government. It does not represent a reduction in the overall income tax rate, but it certainly helps.

In recent weeks, several regions have announced tax breaks as well, but unlike those announced by the country’s Tax Minister María Jesús Montero, they’re not all related to income tax for low earners alone.

Madrid

Madrid has announced that it will reduce its regional IRPF by 4.1 percent. It is scheduled to come into force at the beginning of 2023 and is aimed at helping its citizens “face high inflation and the rise in energy, fuel or food prices,” according to the local government.

Once it is fully approved this year, it will be added to the tax validated by the Community of Madrid and which will mean an estimated collective saving of more than €300 million.

Madrid also recently announced that from Q1 2023, new autónomos in the region will have their social security fees paid for by her government for their first year of being self-employed. 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.

READ ALSO: New self-employed workers in Madrid to pay no social security tax

Valencia region

In late September, Valencian regional president Ximo Puig announced several financial reforms, which will make taxes in the region more progressive.

The biggest of these reforms was a reduction in the regonal income tax rates for those earning under €60,000 gross a year. This is estimated to help 97.4 percent of Valencian taxpayers or 1.34 million workers.

The new income rates will be retroactive and apply to earnings from January 1st 2022, so will be applied to the 2022 annual income tax declaration next year.

READ ALSO: Spain’s Valencia region lowers income tax for yearly earnings under €60K

Balearic Islands

On Monday, October 3rd Prime Minister Pedro Sánchez announced several fiscal incentives for the Balearic Islands.

The 2023 General State Budget will incorporate new specific tax deductions for the Balearic Islands. This will mean a deduction of 90 percent of the tax base in the corporate tax and income tax for non-residents for investments that promote job creation in the region.

There will also be a bonus of 10 to 20 percent for the sale of assets produced in the Balearic Islands within the industrial, livestock, agricultural and fishing industries.

Both of these are due to come into effect on January 1st, 2023. The Balearic Government estimates that these incentives will mean savings of €208 million for 47,000 companies and 71,000 self-employed workers.

Galicia

The government of Galicia has also announced certain tax breaks for its residents, including lowering personal income tax, from 9.4 to 9 percent, for those who earn below €35,000. This will also be in effect retroactively from January 1st, 2022.

Galician regional president Alfonso Rueda has also decided to reduce its wealth tax for residents with worldwide assets above €700,000 by a further 25 percent to reach 50 percent.

Andalusia

In Andalusia, the authorities will reduce the IRPF rate by 4.3 percent. It will affect all taxpayers and will be applied retroactively from January 1st, 2022 and will be reflected in the personal income tax return filed next year.

Andalusian regional president Juanma Moreno also announced that Spanish nationals and foreigners who reside in the southern Spanish region or have a second home there, and whose worldwide assets are above €700,000, will receive a 100 percent tax deduction on the region’s wealth tax. In other words, they will not have to pay any tax on their assets as is the case in almost all of Spain’s regions.

Murcia

Murcia will reduce its regional personal income tax by 4.1 percent, a measure which it estimates will benefit 330,000 residents, resulting in total savings between €8.5 and €10 million. It will affect 96 percent of those required to submit the income tax return, according to the regional government. 

Castilla y León

The regional government of Castilla y León has approved a draft law on tax reductions, which will allow personal income in the first tax bracket to be lowered by 5.3 percent.

Aragón, Cantabria and Navarra

Although the northern regions of Aragón, Cantabria and Navarra have not yet announced tax breaks, all three of them are currently contemplating it.  

In late September, Aragón’s regional president Javier Lambán admitted that it was a “possibility” if the four parties that make up his government agree.

In Navarra, the government is working on an “extraordinary deduction” on personal income tax for those who earn less than €32,000 gross per year.

The leader of the Cantabrian region Miguel Ángel Revilla also stated that “If the tide goes that way, we are not going to be left out”.

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