The fixed Social Security contribution system applied in Spain drew much criticism and rightly so. Contributions were fixed regardless of actual income. To pay 250+ Euros a month for a new autónomo who was starting a small business and looking for customers was an incentive not to register and operate their business unofficially. A few years ago the tarifa plana system was introduced which allowed a lower monthly contribution for the first couple of years, which was very welcome to new businesses. But after this initial period, the autónomo was required to pay rate which are very high in relation to most European countries, particularly given the low rates of pay in Spain, and the system in place was still a disincentive for potential new entrepreneurs to start their own business.
From 1st January 2023, the system has been totally reformed and now the monthly Social Security contribution increases in relation to income (non-linear).
The monthly contribution falls in the following range:
Lowest earners (taxable income 670 Euros per month): contribution 230 Euros per month in 2023 falling to 200 Euros in 2025.
Highest earners (taxable income more than 6,000 Euros per month): contribution 500 Euros per month rising to 590 Euros per month in 2025.
The figure of income used for these purposes is the autónomo’s net profit after adding back their Social Security contributions, less a general deduction of 7%.
Previous incentives for newly registered autonomos are still in place but more limited. The monthly contribution is now 80 Euros per month on commencement and lasts for the first year only. After that, the autónomo must switch to the regular contribution regime, unless their income is less than the national minimum wage (SMI), in which case they can make reduced contributions for the second year.
So obviously this is not going to be a very popular reform because pretty much everyone will end up paying more than before !
For more information and assistance in registering as an autónomo and ongoing tax compliance, please visit our website.