Spain proposes changes to unpopular new social security taxes for self-employed

The Spanish government has suggested changes to the new controversial social security rates for aútonomos which they want to introduce in 2023, this time proposing that contributions on “real earnings” should be between €214 and €991 rather than between €184 and €1,267.

Spain proposes changes to unpopular new social security taxes for self-employed
Spain's Minister of Social Security and Migration Jose Luis Escriva. (Photo: Pierre-Phillipe Marcou/AFP)

Spain’s Social Security Ministry has proposed a new version of its social security payment quota system for the self-employed after their initial proposals in January were roundly criticised.

Spain’s self-employed workers – known as autonomós in Spanish – already pay the highest monthly social security fees in the EU and have complained for years that the system is unfair. These monthly fees, which currently run up to a maximum of €294 a month after two years as self-employed, are separate from income tax. 

The new contributions system proposed in mid-January by Minister of Social Security José Luis Escrivá has been rejected by self-employed unions and many autónomos, as it could see them paying double the amount that freelancers in France and Germany pay and triple that of those in the UK.

Escrivá had suggested a system consisting of 13 different tax contribution brackets based on ‘real earnings’, from those who earn less than €600 a month to those who make more than €4,050 a month.

The new model would have introduced a minimum monthly contribution of €184 for low-earning autónomos and up to €1,267 for the top earners.

This would be done gradually over a period of eight years, so from 2023 to 2031 minimum earners would see their monthly tax contributions drop year after year, whereas high earners would see them rise year on year.

Escrivá said on Friday that after studying the negative response from self-employed unions, “substantial modifications have been made with respect to the latest proposals, in response to the different requests of the social partners”.

The new proposals

Hoping to get unions onside, the Ministry for Social Security have promised – verbally, but not yet in writing – that net income will be redefined, and that some of the costly expenses many self-employed workers face will now be allowed as deductions. 

As for social security contributions, the new plans have already been criticised as they modify contributions at the lower and upper end of the income spectrum in what is perceived to be a non-progressive way: it now proposes a €30 increase to €214 a month for the lowest self-employed earners, those earning under €700 a month, and a €276 reduction to €991 a month for the highest earners.

So the tweaked proposal is slightly better for higher earners (but still very high) and slightly worse for the lowest earners.

Cuts for high earners

The latest plans lower the monthly social security contribution for high earners to €991.44 from €1,267 as initially proposed.

Middle earners

The bulk of the reductions, however, will come in the middle earners bracket (those who earn between €900 and €1,500 a month) where a large portion of Spain’s self-employed workforce sits. 

It is believed that the full details of the new proposals, including the rejigging of the contributions, will be shared with self-employed organisations next Monday but sources say it is believed self-employed workers with a “real income” below €1,125 per month will contribute €264; those earning up to €1,300 per month will contribute €316 monthly (€36 less than originally proposed), and workers with a real income of €1,500 per month will face a €392 monthly fee (€21 less than previously thought). 

Lower earners and first-timers

It is believed those who fall in the €700 – €900 per month quota section will maintain a monthly fee of €245, and that some exceptions for new self-employed workers will be kept: if you are a first-time freelancer, for example, there are some reductions – €60 per month for the first year, €143.10 per month from months 13 to 18, €200.30 per month from 19 months to 2 years, and the same amount up until 3 years.

Unions still not happy

Yet unions are reportedly unhappy that lowest earners will, under the tweaked proposals, see an increase in contributions, whereas the very top earners will see a decrease. “It is an insufficient proposal”, said Eduardo Abad, president of UPTA. “We want there to be substantial savings for the self-employed… the upper brackets are the ones that have to make a greater contribution effort so that the lower brackets can reduce theirs,” he added.

Government reaction

The junior coalition government partner, Unidas Podemos, has also questioned Escrivá’s revised proposal. Party spokesperson in the Congress of Deputies, Pablo Echenique, said on Twitter: “The initial proposal was already unacceptable. Now they want to lower the fee for the self-employed who earn the most and raise it for the most precarious?”

Self-employed’s social security contributions are a story that seems set to rumble on into 2022.

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EU rules Spain’s treatment of domestic workers is discriminatory

European Union judges on Thursday ruled that there is no valid reason for Spain not to offer domestic workers in the country the right to unemployment benefits as is the case for other contract employees. 

EU rules Spain's treatment of domestic workers is discriminatory

The Court of Justice of the European Union on Thursday February 24th ruled that the Spanish system is discriminatory against its domestic workers, contrary to EU laws and indirectly sexist in that it particularly affects women.

“This exclusion entails a greater lack of social protection for domestic employees, which translates into a situation of social abandonment,” the high court statement published on Thursday reads.

Although the ruling is non-binding, it’s a win for domestic workers in Spain who for decades have been forgotten by authorities and usually forced to work in the underground economy.

The decision by the EU courts follows an appeal in 2019 by a domestic worker in Spain who wished to contribute taxes towards future unemployment benefits, only for the country’s Social Security agency to reject her request under the premise that Spanish law doesn’t allow it.

In 2011, Spain approved the current special regime for domestic workers, which recognised some labour rights such as access to sick leave but continued to deny other basic worker benefits such as unemployment payments.

Despite this, a third of the 536,100 domestics (mostly foreign women) who work in Spain are still not signed up to Spain’s social security system, according to the country’s 2021 Labour Force Survey. Two out of every three have earnings around the minimum wage bracket.

READ ALSO: What changed for families who have a domestic worker or cleaner in Spain in 2021

In February 2021, Spain’s Labour Ministry sent out around 45,000 letters to households with empleadas del hogar (domestic workers) warning them that they have to properly register their employees in Spain’s social security system and make the right contributions (cotizaciones), as well as ensuring they are paying them at least the minimum wage.

It’s not the first time the Court of Justice of the European Union calls out Spain’s labour laws as discriminatory as in 2012 they ruled that access to Spain’s more generous contributory pension system indirectly discriminated against women as there are a far higher number of women in part-time jobs in the country.