When you register as self-employed in Spain, the tax burden in terms of Social Security costs and other amounts can be significant, especially if you do not have a lot of income.

Self-employed workers in Spain

Self-employed workers who join this modality of work do not usually refuse to register in the Special Regime of Self-Employed Workers (RETA, for its initials in Spanish), even without knowing its true scope.

If you have thought about becoming a self-employed worker in Spain, by now you certainly began to inquire whether you should pay the Social Security fee for your activities and the amount you must pay for the rest of the taxes.

In theory, if your income does not reach the minimum wage it is not necessary for you to pay the contributions of the Social Security or to register as self-employed. This is in fact stated in a Supreme Court decision (2007) which clarifies “that if your income is lower than the minimum wage, it is not necessary to register as an independent worker.” However, the discussion continues because there are numerous cases where, upon registration for an activity with additional income, then the Social Security considers such activity to be regular.

Flat rate

Regarding the Social Security contribution, if you are self-employed, you must pay about € 260 per month unless you meet the requirements to apply for the flat rate or temporary reduction of this fee that corresponds to the payment of only € 50 per month, if you choose the minimum contribution base (contribution for retirement, health care coverage, without coverage due to work accidents or unemployment).

If you choose a higher contribution base, the reduction will be around 80% of the quota during the first year and 50% during a maximum period of four years.

Initially, this measure included a duration of 6 months that was extended to one year, and the self-employed will begin to enjoy this benefit as of January 1, 2.018.

It is worth mentioning that the period without quoting in the RETA, which is required to be able to benefit from this flat rate is reduced from 5 to 2 years. For those who have enjoyed bonuses a period of three years is fixed.

Also, the flat rate benefited only those under 30, but given its great approval, the government extended the same to all new self-employed workers, regardless of their age.

Spain tax rate for self-employed workers

The tax burden is one of the main concerns of the self-employed. It happens that the tax rate for self-employed workers in Spain is significantly higher than in other European countries.
The VAT and the IRPF (Income Tax Return for Individuals, for its acronym in Spanish) are some of the charges that must be added to the Social Security payment if you have already registered as a self-employed worker.
Amid the discussion of different proposals, it is expected that upon the reform of articles 30.2.5ª of the Personal Income Tax Law at the beginning of 2018, there would be a reduction in the tax rate to pay for deductible expenses considered if the work has affected the activity in the home.
Regarding deductible expenses, the ones to be considered are the services of electricity, water, internet, telephone, etc. The deduction will be estimated at 30% based on the relation between the square meters used for the activity “with respect to the total area.”
For example: If 25 m2 of the total area of a house of 100m2 is allocated or used, this would correspond to 25% of the house.
The sum of supplies is € 150/month with VAT, so the deductible expenses would be 30% of that 25% of the area of the house in use.
Expenses in terms of the 25% of 150 € = 37,5 €
Deductible expenses 30% of the expenses in question = 11,25 €
The maintenance expenses of the taxpayer will also be deductible provided they are produced by an economic activity carried out in a “restaurant and catering establishment” and are paid electronically with a limit of 26.67 Euros per day in Spain and 48.08 abroad.

How much tax do you pay in Spain?

The amount of taxes in Spain that a worker must pay on its own does not correspond to the economic burdens that the self-employed worker must bear.
The reform of the law for self-employed workers incorporates variations that include a penalty for delays in the payment of the Social Security fee. In terms of the current additional fee of 20%, the new norm establishes the reduction to 10% (the first month of delay).
The RETA also has a series of variations in its operation.
The periods to report changes to the contribution base in the Social Security for them to become effective are stipulated as follows:

  • Effective date as of April 1 for applications made between January 1 and March 31.
  • Effective date as of July 1 for applications made between April 1 and June 30.
  • Effective date from October 1 for applications made between July 1 and September 30.
  • Effective date from January 1 of the following year for applications made between October 1 and December 31.

Another important measure to become effective refers to the registrations and retirements from “the self-employed regime,” which applies to those who register or unsubscribe at the end of the month, who will only pay a proportional fee and not the full amount as it was the case until now.
In addition, it is expected the approval and implementation of the reductions (bonuses) in the fees for self-employed workers with disabilities (equal to or higher than 33%), victims of terrorism or gender violence.
These and other tributary measures will come into effect by January 2018, as we have already indicated, so self-employed workers will have to wait until 2019 to take advantage of the tax advantages approved in their Income Tax Return for the 2018 fiscal year.
If you live in La Axarquía, in municipalities such as Nerja, Torrox, Competa or Frigiliana, you can contact us for accounting or solicitor services related with self-employed obligations and taxes to pay in Spain.
The information provided in this article is not intended to be legal advice, but merely conveys general information related to legal issues.

Solicitor in Torre del Mar and Velez-Malaga
(Legal and Tax Help | Accountant | Lawyers | (Malaga – Andalusia-Costa del Sol)