Foreign self-employed workers in Spain have not stopped growing in the last decade. Of the more than 3.3 million self-employed workers that there are today, nearly 400,000 are from another nationality, both from EU and non-EU countries.
Introduction
The freelance or self-employed worker in Spain has two basic obligations: with Social Security (to which they will pay a monthly fee) and with taxes (two taxes are paid, VAT and Income Tax: IRPF). To fulfill both responsibilities there is no distinction by nationality (it does not matter if you are Spanish or from another country). A large part of the doubts of foreign self-employed workers in Spain arise from these two obligations. Lately, one of the most commented concerns whether the new model of 13 different contribution bands proposed by the Government will affect them in 2022. The answer is 'no' because this new system, which has not yet been approved, will enter in force progressively between 2023 and 2031.
Below we address some of the most frequent questions and topics of discussion among foreign self-employed workers in Spain: What is my quota, what taxes do I have to pay, can I apply for the flat rate, what expenses can I deduct...?
What is my monthly fee?
Self-employed workers in Spain who are registered in the Special Scheme for Self-Employed Workers (RETA) are required to pay a monthly fee to Social Security regardless of their country of origin.
The fee is not the same for all workers and is calculated based on gross income and the contribution base. Sometimes, especially when you are not familiar with self-employment or with the Spanish Regime, doubts may arise about how much you should pay per month.
How to calculate the fee?
To calculate your self-employed quota in 2022 you have to apply the following types of contribution:
• 28.3% common contingencies
• 1.3% for professional contingencies
• 0.9% for aid for cessation of activity
• 0.1% for professional training
The sum of all the items of the price adds up to 30.6%.
From January 1, 2022, the minimum fee that a self-employed person must pay to Social Security is 293.94 euros per month (precisely that 30.6% that we have calculated), which corresponds to the minimum contribution base, 960.6 euros. At the other extreme, those who contribute for the highest contribution base, 4,139 euros, will pay the maximum quota, which is 1,266.66 euros per month.
What happens if my contribution base is neither the minimum nor the highest? To know your quota if you have chosen a contribution base between both extremes, you only have to apply the percentage of 30.6%. For example, if you choose a base of 1,000 euros, your monthly fee will be 306 euros.
On the other hand, for self-employed companies and self-employed workers with more than 10 employees in the previous fiscal year, the minimum quota based on the minimum contribution base (€1,214.08/month) is €371.51/month.
Can I request the flat fee?
The self-employed flat rate represents a reduction on the minimum contribution fee and varies according to the month of activity.
In order to apply for the flat rate you must meet a series of requirements:
• Being the first time you register as self-employed.
• Not have been registered as self-employed in the last two years (three years if you previously enjoyed the flat rate).
• Not be a self-employed collaborator (special regime for relatives of the self-employed).
The new self-employed who want to enjoy the flat rate for residing in a municipality with less than 5,000 inhabitants must also meet these conditions:
• Be registered in the municipality.
• New registration in the RETA.
• Registration with the Treasury, including the address where the activity will be carried out.
The reduction of the flat rate is applied in installments and staggered over time. As time progresses and the end of the validity period of your flat rate approaches, the fee will be less reduced. These are the sections:
• First 12 months (tranche 1): fee of 60 euros (reduction of 80% on the base). In other words, the first year of the flat rate, the self-employed worker will pay a monthly fee of 60 euros.
• Months 13 to 18 (tranche 2): fee of 143.10 euros (50% reduction on the base fee).
• Months 19 to 36 (tranche 3): fee of 200.30 euros (30% reduction).
For self-employed residents in towns with less than 5,000 inhabitants, the sections would be the following:
• First 24 months (tranche 1): 60 euros or a bonus of 80% if quoted for bases higher than the minimum established.
• Months 24 to 36 (tranche 2): 30% discount on the minimum fee for common contingencies, only for self-employed workers under 30 years of age and self-employed workers under 35 years of age.
There are also other flat rate categories for specific population groups: people with disabilities, victims of gender-based violence or victims of terrorism:
First 24 months (tranche 1): 60 euros fee or a bonus of 80% if quoted for bases higher than the minimum established (960.60 euros).
Months 24 to 36 (tranche 2): 50% bonus of the minimum fee for common contingencies until completing 5 years from the date of registration.
Flat rate for self-employed companies. Its application by sections would be the following:
Months from 12 to 18: 50% reduction.
Months from 18 to 24: 30% reduction.
Months from 24 to 36: 30% reduction, for self-employed workers under 30 years of age and self-employed workers under 35 years of age.
Can the contribution base be changed?
Self-employed workers can change their contribution base up to four times a year. To do this, they must request it from the General Treasury of the Social Security within the following deadlines and effective dates:
• Effect from April 1, if the request is made between January 1 and March 31.
• Effect from July 1, if the request is made between April 1 and June 30.
• Effect from October 1, if the request is made between July 1 and September 30.
• Effect from January 1 of the following year, if the request is made between October 1 and December 31.
Taxes: personal income tax and VAT
The Spanish fiscal year is from January to December. You must file your tax returns every three months: in January, April, July and October.
• Each quarter you will pay income tax after declaring your income and deducting expenses. Then you must present the so-called Income Statement, which is done once a year, always between May and June. This is where your actual tax rate will be adjusted (you may have paid a little more or less).
• On the other hand, there is VAT, which is the tax that you must include in your invoices with customers. It corresponds to 21% of the price and is declared quarterly by deducting the VAT paid on your expenses as a self-employed worker from the VAT charged to your clients.
Withholdings in 2022
The Tax Agency sets withholdings in the Personal Income Tax (IRPF) that must be applied by both the self-employed and the rest of the taxpayers.
Personal income tax is a progressive tax and, therefore, there are different withholding percentages based on the salary and savings of each taxpayer. The self-employed must make these withholdings on the invoices they issue and submit quarterly returns through model 130 if they pay taxes in direct estimation, or model 131 if they do so in modules or indirect estimation.
What withholdings do the self-employed have?
As a general rule, all self-employed workers have to apply a 15% retention on their invoices. However, there are exceptions for those who have just started their activity or who carry out certain activities in a rural environment:
1) Pig and poultry fattening livestock activities: 1% retention
2) Agricultural activities and other livestock activities: 2%
3) Forestry activities: 2%
In addition, the Treasury establishes reduced withholdings for those who register for the first time as self-employed. Self-employed workers may opt for a 7% withholding rate during the year they start their activity and the following two. After these three years, 15% will be applied.
One aspect must be taken into account that sometimes self-employed workers forget: withholdings not only affect the self-employed person but also his clients, who are obliged to apply the corresponding withholding and enter it in the Treasury.
Income tax bands in 2022
The Income Tax is not only applied with advance withholdings, it also has some sections subject to taxes, with which the taxpayer reports to the Treasury each year. The more income, the more taxes to pay. Depending on whether throughout the year the self-employed worker has paid more or less than what was due with their advances, the administration will ask them to enter or will return the corresponding amount.
• The personal income tax bands that will apply in 2022 in Spain will be the following:
• First tranche: from 0 euros to 12,450 euros: 19%.
• Second tranche: from €12,451 to €20,2000: 24%.
• Third tranche: from €20,201 to €35,200: 30%.
• Fourth tranche: from €35,201 to €60,000: 37%.
• Fifth tranche: from €60,001 to €300,000: 45%.
• Sixth tranche: more than 300,001 euros: 47%.
Contact us
For any questions regarding being self-employed in Spain, contact us below. Our legal team can offer solutions and optimise your setup:
