New contribution system for the self-employed in Spain for 2023

Are you self-employed ? This is of great interest to you. From 2023 the new contribution system for the self-employed 2023 will start. Here we explain how it works and how much you will pay.

The majority of self-employed people in Spain have always paid the minimum social security contribution or “cuota mínima de seguridad social”. Some politicians and experts think that this is not a true reflection of reality, nor does it allow to support the social security fund and, as it is done in Europe, now the self-employed will have to contribute to the social security fund according to what they earn with the new self-employed contribution system. But then, how much will the self-employed pay in 2023?

Royal Decree-Law 13/2022, of 26 July, which establishes a new contribution system for self-employed workers, has been published in the Official State Gazette.

This new contribution system for the self-employed consists of a progressive contribution model that will be implemented over a period of three years, between 2023 and 2025. In this process, the contribution will be reduced for the self-employed with the lowest income, while it will be increased for those who earn the most.

Thus, the new system foresees 15 contribution levels in which each self-employed person will be placed according to their expected income, which they will have to declare to the Social Security.

While the first levels will mean a reduction in the contribution with respect to the minimum base, the higher levels will see an increase.

It will come into force on 1 January 2023 with a minimum contribution of 230 euros and a maximum of 500 euros. In 2024, contributions will range from 225 to 530 euros. And finally, in 2025, contributions for the self-employed will be between 200 and 590 euros.

The aim is to equalise benefits between the general scheme and the RETA. The average pension for the self-employed is 43% lower than that of the general scheme, which corresponds to a difference of around 600 euros. However, this reform does not only affect the contribution table, as the regulation approved today contains other points of interest for the self-employed.

Royal Decree-Law 13/2022 of 26 July (BOE 27 July 2022) introduces a new contribution system for the net income of the self-employed. Among its new features, the following stand out:

1. Entry into force and deadline for the new self-employed contribution system

The Royal Decree-Law will come into force on 1 January 2023. However, the application of this change will be gradual.

The new system will be implemented over a maximum period of nine years and will be reviewed every three years (the first implementation period will run from 2023 to 2025).

2. Reduced fee of 80 euros per month between 2023 and 2025 for starting a self-employed activity.

For the period between 2023 and 2025, a reduced rate of 80 euros per month will be established for cases of first-time registration in the RETA or for cases in which the self-employed person has not been registered in the two years immediately prior to registration.

This measure will apply for the first 12 months and may be extended for a further 12 months if the first year’s income is less than the minimum interprofessional wage.

This statutory figure will replace the flat rate for the self-employed.

3. Contribution tables for the self-employed according to the income obtained in the financial years 2023, 2024 and 2025

Employees included in the special scheme for self-employed workers (RETA), commonly known as the self-employed, must pay contributions based on their total income.

The self-employed pay contributions on the basis of the contribution base corresponding to their income class according to the general and reduced tables applicable for each year in the period 2023 to 2025.

The new system provides for progressive contribution classes for the years 2023 to 2025, depending on the level of total income.

– Minimum contribution: In 2023, self-employed persons with a net income of less than 670 euros will pay 230 euros per month. In 2024 they will pay 225 euros, and in 2025 the contribution will be 200 euros.

– Maximum contribution: At the other end of the scale, the self-employed paying the maximum contribution (over 6,000 euros) will pay 500 euros in 2023, 530 euros in 2024 and 590 euros in 2025.

4. Up to six annual changes in the contribution base (bracket)

Workers affiliated to the RETA may change the base on which they must pay contributions up to six times a year, choosing a different base within the minimum and maximum limits that correspond to them in each financial year, provided that they apply to the Social Security General Treasury, with the following effects

(a) 1 March if the application is made between 1 January and the last calendar day of February.

(b) 1 May, if the application is made between 1 March and 30 April.

(c) 1 July, if the application is made between 1 May and 30 June.

(d) 1 September, if the application is made between 1 July and 31 August.

(e) 1 November, if the application is made between 1 September and 31 October.

(f) 1 January of the following year if the application is made between 1 November and 31 December.

This option can be used if the income earned in the current year changes.

FAQs on the self-employed contribution

1. Will the flat rate for the self-employed continue in 2023?

The benefits of the contribution will continue to apply, under the same conditions, to those who were beneficiaries of it before 1 January 2023, until the maximum periods established for its application in each case are exhausted. At the end of the transitional period, the reduced contribution of EUR 80 per month will apply between 2023 and 2025.

2. Do self-employed workers who do not reach the sectoral minimum wage have to pay contributions?

The new system allows contributors with contributions calculated on contribution bases below the sectoral minimum wage to pay contributions if the self-employed person’s income does not reach this threshold.

3. How is the net annual income that places the self-employed person in the respective contribution bracket determined?

– Self-employed: according to the provisions of the Personal Income Tax Ordinance for the calculation of net income from self-employment, plus the self-employed person’s contribution and minus 7% of this amount.

– Self-employed corporate self-employed: the total income in cash or in kind from the participation in the equity of those entities in which they have a stake of at least 33% of the share capital or, if they have the status of administrator, a stake of at least 25%, at the time of accrual of Corporate Income Tax, as well as the total income from work derived from their activity in these entities, is calculated.

4. What happens to self-employed workers who, on 31 December 2022, were contributing at a higher taxable base than that which corresponded to them according to their income?

Self-employed persons or professionals who have paid contributions on 31 December 2022 at a higher contribution base than the one that would correspond to them according to their income, will be able to maintain this contribution base or a lower one, even if their income implies the application of a lower contribution base than the other two.

5. Are the maximum contribution limits maintained according to the age of the self-employed?

The amendment removes the current age-related contribution limits for the self-employed. Under the new model, the self-employed over the age of 47 will pay contributions based on their actual income, i.e. it will be possible to increase their contribution base in the last phase of their professional career as long as they increase their income.

6. How is the initial determination of the contribution class into which the self-employed person should fall?

When applying for registration, the self-employed must present a declaration of the net income they expect to obtain in the calendar year in which they register for their economic or professional activity.

– If the provisional contribution is lower than that corresponding to the minimum contribution base of the income group in which the income falls: the self-employed must pay the difference between the two contributions before the last day of the month following the month in which they have been notified of the result of the regularisation, without interest on arrears or surcharges if they pay within this period.

– If the contribution provisionally paid is higher than that corresponding to the maximum taxable base for the income category in which your income falls: the TGSS will automatically refund the difference between the two contributions, without interest on late payment, before 31 May of the year following that in which the corresponding tax authorities notified the Social Security General Tax Administration of the income payable.

7. Am I entitled to an allowance for caring for a child with cancer or another serious illness?

Yes, if you receive a rebate of 75% of your self-employed contribution during the time you receive the benefit for caring for a minor child with cancer or another serious illness.

8. Am I entitled to a rebate for the birth of a child, adoption, foster care and guardianship when I become self-employed again?

Yes, you are entitled to a rebate of 80% of the contribution for 24 months from the date of your return to self-employment.

9. If I was already registered as self-employed, am I obliged to declare my income to adjust my contribution base?

No, you are not. If you do not declare anything, you will continue to pay contributions in 2023 on the basis you had on 31 December 2022.

10. If on 31 December 2022 I pay contributions on a higher base than the one I would be entitled to on the basis of my income, can I keep that base?

Yes, even if your income is low, you can keep the contribution base at which you were contributing on 31 December 2022.