Self-employed fees 2023 and its new proposals

On 13 January 2022, the Ministry of Social Security presented a new reform of the contribution system for the self-employed, which aims to introduce a thirteen-tier system instead of the current maximum and minimum contributions. In this way, the self-employed would pay contributions according to the income they declare, as is the case for salaried workers.

In this article we will analyse Minister Escrivá's proposal and explain the pros and cons of the reform, as it will undoubtedly mean a structural change in the country's labour and economic system.

New self-employed tranches 2023

The reform - scheduled to enter into force in 2023 - proposes thirteen new tranches of 1,267 in 2031. 

The government's proposal would be phased in over the next nine years (2023 - 2031), with reviews every 3 years.

In the first bracket, it would include those self-employed who earn less than 600 euros per month. In this case, the contribution would be €281.50 per month in 2023 and €183.60 per month in 2031. The same applies to the self-employed who earn more than €4,050 per month: the contribution to be paid in 2023 would be €351.90 per month and €1266.7 per month in 2031. 

This "flexibility" is especially designed for situations such as tourism. For example, coastal restaurants which, in high seasons, earn higher revenues than they will have in low season, such as in winter. For this reason, the reform will introduce the possibility of change the base tranche up to 6 times a year.

However, we must point out that, Currently, the minimum social security contribution that a self-employed person has to pay in Spain is 294 euros per month. This figure, in comparison with other countries such as the United Kingdom (14 euros per month) or Portugal (20 euros per month), is quite high, but the Ministry of Social Security justifies this difference by the coverage available to the self-employed in Spainsuch as unemployment benefits for the self-employed, which would be improved by reform.

Flat Rate Self-Employed 2023

The Government's proposal to reform the contributions of the self-employed includes a change in the so-called "flat rate" (the rebate on the contribution at the start of the activity during the first two years).

To this end, it proposes increase the flat rate to 70 euros 60 -from the current 60 euros-, and exclude the self-employed with incomes above the Minimum Interprofessional Wage (<1,125.9 euros per month).

Advantages of the new self-employed quotas 2023

• Making the system more progressiveThe self-employed's contributions will be adapted to their real income: the higher the income, the higher the contributions.

• Reduction of the quota for low income earnersAccording to the Ministry of Social Security, two out of three self-employed people will benefit - referring to those whose income is equal to or less than 900 euros per month. 

• Flexibility to adapt the quotaThe possibility of modifying the bracket up to six times, in order to adjust the monthly income.

• Improving social protection for the self-employedThe average pension for the self-employed is 59.4% of that received by workers in the general scheme: 794 euros (self-employed) compared to 1,338 euros (general scheme). The same applies to sick leave benefits: they are lower.

This is because 85% of the self-employed pay contributions at the minimum rate. 

Disadvantages of the new 2023 self-employed quotas

• The risk premium of entrepreneurship is not appreciated: income uncertainty, stress, constant reinvention, longer working hours and fewer holidays.

• Increased difficulty in recruiting workersdue to increased costs (fees).

• Possible price increase in products or servicesIn order to maintain the same purchasing power, many self-employed will be forced to revise the price of their services or products.

• Departure of the self-employed to countries with higher tax attractivenessFor those who can work remotely, they could look for tax residences such as Portugal, Andorra, Gibraltar or the United Kingdom.

• Late reduction for low income earners750, you will have to pay 244.80 euros as a self-employed person, an amount that is not sustainable over time if you have no other sources of income.

• Increase in the quota for the middle class self-employed: Based on the average salary in 2020, €2,038 gross per month, we will explain the situation in which a self-employed person would find himself: a self-employed person who, after expenses, has an income of €2,038, will have to pay €474 per month in 2027 and €596.7 per month in 2031. That is a rise of €3,636 per year.

• High rise for top earnersA self-employed person earning €4,000/month will have to pay €474 in 2027 and will then have to pay €1,123 in 2031.

To this we must add that Spain is currently the country with the highest Social Security contributions for the self-employed and that we must also add the personal income tax rate that the self-employed have to pay, also depending on their income (from 19% to 47%).

Now that you know about the new self-employed quota proposal, what do you think about it? Do you have any doubts?Our employment lawyers can solve it! You can write to us using the contact form below.