New income-related contribution scheme for self-employed collects more than ever before in Spain

Mission accomplished: the new contribution system for the 'autonomos' (self-employed) in Spain has raised more revenue in its first year of implementation than ever before. This was announced by the Ministry of Social Security to its social partners at the meeting held this Monday to discuss the new levels for contribution payments as of next year and beyond, a meeting they described as "positive".

"The reform has increased the system's average contribution base in its first year of implementation, so revenue collection has not only not decreased, but has actually increased, thus contributing to the system's sustainability," explained UATAE (the Spanish union for the self-employed and entrepreneurs) in a statement. Therefore, the average income of self-employed workers is now around 25,000 euros per year (based on data from the 2023 financial year). However, this amount differs significantly depending on whether they are corporate (business owners) or non-corporate. The former earns an average income of almost 39,000 euros, while the latter earns less than 18,500 euros, according to UATAE data. This association pointed out that this means that self-employed individuals, on average, earn in the vicinity of Spain's minimum wage, after deducting Social Security contributions.

The new system of income-related contributions (net income) that was introduced from 2023 has allowed 842,000 self-employed workers to pay more into the system, as they were paying less than they should. On the other hand, more than 590,000 self-employed were overpaying, the most vulnerable, as mentioned by the UGT trade union yesterday. What's more, some 315,000 self-employed workers paid less in 2023 than the 2022 minimum, representing 10% of the group. "The new system makes them less vulnerable because they pay less for similar future protection," says the UATAE spokesperson.

The corporate self-employed, proportionally, have been better able to navigate the new system and reflect greater changes in their contribution base. This may be due to the fact that they receive better advice as a result of their financial situation. It is also relevant because this lack of advice and information can influence the previous point and, over the years, lead to a greater number of low-income earners reducing their contribution base. In fact, this is already beginning to be seen in the provisional contribution bases for the 2024 tax year.

In this final stretch of the fiscal year, in addition to establishing the new self-employed contributions starting in 2026, the Spanish government intends to modify the cessation of business activity to extend it to more entrepreneurs, given that 60% of applications are currently rejected.

What Social Security and social partners have agreed on is to improve procedures and speed up timescales, after some problems were detected during the first phase of regulating self-employed contributions for 2023, including the proportion of self-employed business owners and collaborating family members who were not allowed to maintain their 2022 base due to their zero income.

In this regard, UATAE stated that central government has confirmed that self-employed workers who decide to waive the refund will be able to revalue their contribution base as of 31 December 2022, applying the update in line with the CPI (consumer price index, inflation). That waiver will be tacit, without the need for any additional procedures, thus simplifying the process, unless the self-employed worker objects.