Reform of the contribution payments of self-employed persons

Royal Decree-Law 13/2022 of 26 July 2022 has been published, introducing a new contribution system for the self-employed and extending protection in the event of termination of activity. For the first time, the self-employed now pay contributions based on their net monthly income, i.e. the difference between their income and their expenses. This is intended to provide them with better protection, especially in the case of low income, and to create a system with more flexible contributions.

The system that has now been adopted will come into force in January 2023 and run in its form until 2025.

It has a total duration of nine years and is divided into 15 groups with different quotas. Initially, only the concrete regulation for the period 2023 to 2025 was decided. Then the scheme will be evaluated and changes can be made depending on the economic situation prevailing at that time. These reviews will take place every three years until 2032.

Content of the reform

Currently, the self-employed set their own social security contribution, unlike employees for whom a percentage of their salary is paid. Under the new system, the self-employed now pay their contributions according to their net income, i.e. the difference between income and costs.

For the first year, the new system provides for minimum contributions of between 230 and 500 euros.

The new minimum contribution of 230 euros per month (valid for 2023) means a saving of 64 euros compared to the current minimum contribution of 294 euros. It applies in particular to self-employed persons earning up to 670 euros per month. For them, the contribution will be gradually reduced to 200 euros in 2025, i.e. by almost 100 euros compared to the current contribution.

For employees who become self-employed, a reduced contribution of 80 euros per month applies for the first year. This can be extended for another 12 months if the income in the first year is below the minimum wage.

The following minimum contributions and groups now apply:

>670 y <=900849,67260816,99250784,31220
>900 y <=1.125,9898,69275872,55267849,67260
>1.125,9 y <=1.300950,98291950,98291947,71290
>1.300 y <=1.500960,78294960,78294960,78294
>1.500 y <=1.700960,78294960,78294960,78294
>1.700 y <=1.8501013,073101045,753201143,79350
>1.850 y <=2.0301029,413151062,093251209,15370
>2.030 y <=2.3301045,753201078,433301274,51390
>2.330 y <=2.7601078,433301111,113401356,21415
>2.760 y <=3.1901143,793501176,473601437,91440
>3.190 y <=3.6201209,153701241,833801519,61465
>3.620 y <=4.0501274,513901307,194001601,31490
>4.050 y <=6.0001372,554201454,254451732,03530

Change of group

From 2023, self-employed persons must place themselves in a group according to their forecasts and previous activity. However, depending on imponderables or professional development, they can change groups every two months.

At the same time, the data reconciliation of the Ministry of Integration, Social Security and Migration with the tax office data has been strengthened so that the social security contribution is adjusted according to the actual net income despite multiple changes of group when the tax office data for the year is finalised. If self-employed persons have paid less than they should, they must pay the balance in arrears, and if they have paid less, the tax office refunds accordingly.

Deductions from expenses

Attempts have been made to simplify the deduction of expenses that are difficult to justify. There is now a fixed amount of 7% for the self-employed and 3% for independent contractors.

Partial unemployment benefit

The new system includes the recognition of a partial unemployment benefit. It amounts to 50% of the assessment base, is compatible with other activities and can be paid over a period of four months to two years.

Unlike the current system, it is no longer necessary to close down the business, terminate contracts or deregister as self-employed to receive this allowance.

The allowance is available for self-employed persons whose income or turnover has fallen by 75% in two quarters, or who have reduced the working hours of 60% of their employees or suspended their contracts, as well as for those with incomes below the minimum wage. Furthermore, it exists for the self-employed who have been in debt to non-public creditors for two quarters and whose income has been reduced by 75 %.

Autor: Moritz Tauschwitz
Autor: Luis Bravo