New social security system for self-employed in Spain confirmed

by Lorraine Williamson
social security system for self-employed

MADRID – The new social security system for the self-employed is confirmed; from 2023, self-employed persons and self-employed persons with staff can count on more realistic premiums and a more balanced situation compared to employees. 

The Council of Ministers approved a new social security system for the self-employed on Tuesday. In this system, the calculation of the social premium is based on the actual income of the self-employed. However, the ultimate desired social security situation will only be achieved in stages over the next nine years. A further step in the transition will be taken every three years until 2032. 

For the first period (from 2023 to 2025), the monthly premiums are divided into 15 scales. These can increase from €230 to €500. Furthermore, the scale on which you are self-employed now depends on your (often varying) income received. 

This linking of the premium to the actual income will be a major improvement for the position of the self-employed. It is expected that one in two self-employed persons will pay less than the current premium. 

Alignment with social security situation of employees 

According to José Luis Escrivá, Spain’s Minister of Social Affairs and Employment, the 100-page bill corrects the imbalance between workers in the current system. Not only about income-related social contributions, but also concerning pensions and other social provisions. For example, the pensions of the self-employed are now about 43% lower than those of employees. 

Fifteen scales and scale change is possible 

The system of 15 scales has been established for the coming period of three years by the Ministry. This was in consultation with the Spanish self-employed organisations (ATA, UPTA and Uatae). The parties will have to make new agreements about the next two three-year periods. 

Click here for the table of the scales. 

Every two months you can change your scale depending on your income. In addition, you can request a change of scale up to six times a year. This way you can better match your premium to your expected income in every period of the year. 

Cogesa Expats

Deductible expenses 

Some costs are described by the Spanish tax authorities as expenses that are difficult to justify. As a result, they do not put pressure on the company’s profits. However, they do affect the income received, i.e. the amount of the premium that you have to pay. 

Social Affairs mentions the rental of buildings and the purchase of computers or other necessities as examples. From now on, these expenses are deductible for a self-employed person with a maximum of 7% of the profit. For a self-employed person in a partnership, a maximum of 3% of the profit applies. 

The figure of low starter premiums will also return in the new scheme, but then as the fixed reduced premium of €80 per month for starters in their first year. This reduced rate will only be extended for those self-employed who have failed to generate sufficient turnover and whose income is below the minimum salary (abbreviated as SMI in Spain). For the other cases, of course, the scale associated with their profit applies. 

Reliable sources at the Spanish Ministry of Social Affairs and Employment indicate that it is the intention that this reduced rate for start-ups will continue to exist as a general instrument after 2032. 

Mecanismo RED 

In the event of a generally bad economy affecting a particular sector in particular and for a temporary period, the Spanish Council of Ministers can invoke the social security service called Mecanismo RED. 

Conditions for receiving this benefit are: income must have fallen by 75%, income must not exceed the minimum wage and at least 75% of all workers in the company must have been affected by the crisis. The benefit amounts to 50% of the reference wage for one year. The activities do not have to be stopped and half of the social premium to be paid is reimbursed. 

The Council of Ministers can also deploy the Mecanismo RED social provision in the event of permanent changes affecting a certain sector. It must then concern a permanent change that necessitates additional training or retraining. The conditions are: a fall in income of 50%, or 75% in the case of self-employed persons, an income no higher than the minimum wage and at least 75% of all workers in the company must have been affected by the crisis. In addition, an investment and training plan must be drawn up. The benefit is a one-off payment of 70% of the reference wage and the reimbursement of half of the social premium to be paid. 

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