Guide to New Social Security Contributions In Spain
On Google, you will find a lot of information about the new self-employed contributions in Spain. In this article, I try to solve and explain all the questions about the new contribution system for self-employed easily.
The subject is quite complicated and with many “loose ends”, even for us tax advisors. I hope my delay has paid off and you find it easy to find the answers you need. Let’s get to it…
Table of Contents
Process of negotiation and approval of the new contribution system
After more than 13 months of negotiations between the Government, the unions, the employers’ association and the representative organizations of self-employed workers, they reached an agreement on the new system of self-employed contributions.
This new listing regime has been regulated by Royal Decree-Law 13/2022 and will enter into force on January 1, 2023. This emergency procedure of the Royal Decree-Law has been used for 3 fundamental reasons:
1. To comply with the commitment included in the Recovery, Transformation and Resilience Plan to have said system established in the first half of 2022,
2. Having enough time, on the part of Social Security, for the implementation of complex technical and organizational adaptations,
3. And lastly, explain to all the self-employed what the new contribution system consists of.
This Royal Decree-Law, approved by the Council of Ministers, was already validated by the Congress of Deputies on August 25, so the new contribution system for the self-employed will come into force in 2023.
Statements by the Government and ATA on the new contribution system
It is worth mentioning in this section the statements made by Minister Escrivá on the reform of self-employed payments:
“[…] this reform will make it very easy for the self-employed to adapt their contributions at any time of your working life. In addition, it is very important to note that what the self-employed are going to contribute is based on their net income, that is, income minus deductible expenses. And we have worked with social agents to define with maximum precision what these deductible expenses will be.”
On the other hand, Lorenzo Amor, president of the National Federation of Associations of Self-employed Workers (ATA), remarked the following:
“We believe that we have reached the best possible agreement since 75% of the self-employed will pay the same or less than now. And only 750,000 freelancers, 25% of the group, will pay something more, around 10% or 20%, but it will be gradually. For the vast majority, the rise will be half of what the Government intended. Also, Social protection provides coverage for situations of cessation of activity and even drops in income. So it is a system that will give more protection and security to the self-employed”.
In the same appearance, Lorenzo Amor commented on other benefits contemplated by the reform:
“The Flat Rate is maintained and extended for the self-employed with incomes of less than the SMI, the self-employed over 47 years of age will be able to contribute based on their real income, something that is an anomaly today because half of them cannot contribute above 2,000 euros. Protection mechanisms are also established for the self-employed with sick children in their care or for women who return after maternity leave.”
How you will have to act from 2023
Indeed now you have a thousand questions about what you have to do, how much you will pay, when, how much you have to contribute, what happens to your flat rate… and many more. Therefore, I will try to simplify it as much as possible by following these 4 phases.
|You will have to estimate your monthly net return as of January 2023. (*)|
(*) Our clients will have an assistant that will indicate, based on the monthly average of their net returns, to which tranche they should contribute.
|With that figure, you will have to go to the table with the 15 sections and locate yourself in one of them.|
|Knowing the section in which you are, you will have to choose an amount as the basis of your contribution between the minimum and the maximum.|
|And by applying 30.6% to that figure, you will get your monthly contribution payment.|
What obligations do I have during the year if my forecast of income and expenses changes?
If your forecast of income and expenses varies, and therefore, your net return, you will have to change your contribution base. That is, carry out these 4 phases again and communicate your new contribution base to Social Security (you will have to make these communications through the Importass platform).
You can make up to 6 changes each year. Here are the dates on which you can make the 6 changes.
And if my forecasts fail me and I have been paying more instalments than I should have…
Don’t worry! Once you make the income statement for the year, that is, when you make the income for 2023 in 2024, the Treasury will inform the Security Social they will determine the declared returns and the section in which you should have contributed.
At this point, 2 things can happen:
- You have paid less than what you had to. In this case, you will have a little over a month to pay the difference between both amounts from when you receive the notification.
- Suppose you have paid more contribution than what corresponds to you (overpriced). Here Social Security will automatically refund the difference between the two amounts before May 31 of the following year. That is to say, if we talk about the Annual income for 2023 and the regularization of the fees for that year, the term you have to receive the return of the difference would be until May 31, 2025.
Looking at the dates of entry and return, it is more interesting to err on down than up. That is, you’d better make a mistake estimating a lower yield. If it turns out that you make a mistake on the rise, they may take 2 years to return to you the excess fee you paid.
What’s new in the Flat Rate
Let’s remind you what requirements you must meet to be entitled to the flat rate.
- Register for the first time as self-employed.
- Not being registered as self-employed in the last two years (three, in case you previously enjoyed a bonus).
- Not being a self-employed collaborator (special regime for relatives of the self-employed).
If you meet these requirements, in 2023, you will pay €80/month fee during the first 12 months of subscription, while with the current flat rate, you pay €60/month fee…
And that’s it? That’s all about the flat rate in 2023? Well, I’m afraid in most cases, yes. Only if your annual net income is less than the minimum annual interprofessional salary (€14,000 in 2022) will you continue to pay €80/month fee for the following 12 months.
To be entitled to the reduction during the 2nd year (and pay only €80/month), it is essential that you request it before the start of the 2nd year, accompanying a statement with your forecast that your annual net returns will be less than the SMI (Minimum Interprofessional Salary).
Madrid and Andalusia
In the Communities of Madrid and Andalusia, as of January 1, 2023, the new self-employed will generally pay a zero fee contribution during the first year. And those self-employed whose annual net income is less than the minimum interprofessional salary during the second year will also pay a zero fee for the following 12 months.
When that benefit you?
As you can see, the flat rate from 2023 is only more beneficial than the current one if, during the 2nd year, you have an annual net return below the SMI. In the rest of the cases, you will pay more for these reasons:
- During the first year, you pay €20 more per month, which makes spending more expensive by €240.
- And during the 2nd year, you will pay the fee that corresponds to you, while in the current flat rate, you have a reduction of 50% for 6 months and 30% for the following 6.
What situation are you in as of December 31, 2022?
A self-employed person who, as of December 31, 2022, is paying the minimum fee (€294).
We advise that from January 1, 2023, you do your calculations and estimate your monthly net return. Once you know it, you must enter the Importass platform and choose the section and the contribution base.
As you know, the fee you will be charged on January 31 will be the same throughout the year unless you change it.
What if I don’t remember to make the communication?
In that case, you will continue to contribute during 2023 based on the contribution for which you contributed in December 2022, updated according to the General State Budget Law.
Self-employed who, as of December 31, 2022, still have months of flat rate left.
If you are a newly self-employed person and are paying the fees corresponding to the flat rate in December 2022, you will wonder what will happen from January 2023.
Here we can consider 2 situations:
- If, in January 2023, you have to pay a fee for the first 12 months from registration, you will be charged €60/month. Once you have to pay the 13th month from registration, the bonuses will be applied -50% (from the 13th to the 18th month) and 30% (from the 19th to the 24th) on the minimum base- valid until December 31 of 2022. As of 2023, the minimum base will be the one approved by the General State Budget Law for 2023.
- If in January 2023 you have to pay a fee for the month 13 to 24 from registration, you will be charged the fee corresponding to the minimum base with a bonus of 50% (from months 13 to 18) and 30% (from months 19 to 24). As of 2023, the minimum base will be the one approved by the General State Budget Law for 2023.
For practical purposes…
Currently, the self-employed with a flat rate who pay instalments between months 13 to 18 are paying €147, and those who pay instalments between months 19 to 24 are paying €205.80.
The 2023 General State Budget Law will approve a minimum base higher than the current €960.60, so the amount of the instalments will rise, hopefully not excessively.
Self-employed who, as of December 31, 2022, is paying a fee higher than the minimum.
Suppose you thought about your retirement and benefits and decided to contribute for a higher base than the minimum. It turns out that based on your estimated monthly net income, you will not reach that contribution bracket. Will you be able to continue contributing for that higher base to the minimum?
The answer is yes, as long as you communicate it from January 1, 2023, through the Importass platform.
But you must remember that to be entitled to this option, you must contribute to that high base in December 2022. Therefore, if you are now contributing to the minimum base and plan to contribute from 2023 to a base higher than the current, you must communicate the base increase before September 30, 2022.
If you make the communication after October 1, the effects will be for January 1, 2023, and your base will have been the minimum in the month of December.
Let’s go with a small example.
Our self-employed worker has been contributing for years for a base of €2,000, paying a fee of €612, and intends to continue contributing for that amount.
With the new contribution system, its monthly net return estimate amounts to €1,400, which would correspond to section 2 of the general table. In this section, you can opt for a maximum base of €1,500, with which you would be contributing less than you would like.
The new rule allows you to continue contributing for the €2,000 as long as you notify each year through the Importass platform.
Self-employed in multiactivity (“pluriactividad”)
In this new contribution system, the double contribution refund of 50% of the excess contribution is maintained (in this article, we explain what it consists of).
And the novelty, very attractive for the self-employed in multiple activities, is that if they contribute to IT (Temporary Disability) in the general scheme for their work as an employee and also contribute to IT in RETA for their self-employment, they can reduce their contribution in the self-employed regime not contributing double for that contingency.
We will have to wait for the Importass platform to be enabled (as of January 1, 2023) to know the procedure you must complete to communicate this situation.
Find out how the 15 tranches are distributed
What is meant by annual net income?
In the drafting of the Royal Decree-Law, this concept is used on many occasions. Therefore, I have considered it essential to explain how to obtain it.
Formula= ⅀ returns over/IRPF + ⅀ SS contrib. – deduct. 7%*
*deduct. 7% = (⅀ returns over/IRPF + ⅀ SS fees) x7%
(according to statements by the Vice President of ATA, Celia Ferrero, this deduction is a corrective index that corrects the inequalities between the different types of self-employed)
I will explain what you have to do to calculate the performance and give you an example.
First, you must add all the income of all your activities and subtract all the expenses of all the activities, computed according to what the Personal Income Tax Law establishes so that you will obtain the ⅀ returns on personal income tax. To that figure, you must add the sum of all self-employed fees paid during the year (⅀ SS fees).
Next, you calculate 7% of that amount (⅀ returns over/IRPF + ⅀ SS fees) and subtract it.
An IT person who registers on 01/01/2023 and is entitled to the flat rate pays €80/month as a freelancer fee throughout the year 2023. To continue paying those €80 for another 12 months, your annual net income during 2024 must be less than €14,000 (considering that in 2 years, the SMI does not change). Let’s see their numbers and check them out.
Total income 2024: €18,000
Total expenses 2024: €4,500
Total self-employed fees: 80 x 12 = €960
deduct. 7%: (€18,000 – €4,500) x 7% = €945
Net yield 2024: (€18,000 – €4,500) + €960 – €945 = €13,515
In this case and with these figures, our computer technician will be able to continue to benefit from the flat rate for another 12 months.
What is meant by monthly net return?
This figure will be what you will have to estimate to choose the section and the monthly contribution base. I will give you the formula and its explanation:
Formula = (⅀ forecast income without SS fees – 7% deduction) / 12
First, you must add all the annual income from all your activities and subtract all the annual expenses from all activities, computed as established in the Personal Income Tax Law, but without computing the self-employed fees. You subtract 7% from this amount and divide it by 12.
Total estimated annual income: €18,000
Total estimated annual expenses without self-employment fees: €4,500
deduct. 7%: (€18,000 – €4,500) x 7% = €945
Estimated monthly net return: [(€18.000 – €4.500) – €945]/12 = €1.046,25
Know the dates to be able to change your contribution up to 6 times a year
As of 2023, the self-employed will be able to change their contribution payments up to 6 times a year to adapt their contributions and fees to their business situation. So when they start, they can be in lower sections, and when the situation improves, they can contribute more and have rights to higher benefits. Being able to go down again to low sections in transitory situations of difficulty.
You can carry out this procedure through the tool Importass.
Below we list the effective date of the change based on the date on which you made the request:
- March 1 if you request between January 1 and February 28/29.
- May 1 if you request between March 1 and April 30.
- July 1, if you request between May 1 and June 30.
- September 1 if you request between July 1 and August 31.
- November 1 if you request between September 1 and October 31.
- January 1 of the following year if you request between November 1 and December 31.
Importass, the new Social Security portal
What does this portal offer?
It is not a simple web page or another HQ of the administration. Importass is designed for you to search for information and carry out procedures from any device in a simple, personalized and guided way. With a natural language, the portal guides you and anticipates your needs.
In addition, you have a personal area where you can check your Social Security Number, view your work life digitally or check your situation instantly.
What procedures of interest can you carry out through Importass?
These are some of the most common procedures that you can carry out through this portal:
- Consult and obtain reports, among others, about your employment situation. You can see your work life digitally.
- Modify your personal contact and address data.
- Consult and pay debts to be up to date with payments.
- Communicate a change in the contribution base according to the new tranche system (still to be implemented).
- Consult the monthly self-employment receipt corresponding to the current month.
A video explaining the New Contributions System 2023
We have recorded an explanatory video of the new contribution system 2023 that could clarify a little better how everything will work:
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