€1,500 income, €470 fee: the self-employed in Spain are condemned to always pay more


After two years of negotiation with union representatives and numerous published drafts, the government has finally presented its reform of the Special Regime for Self-Employed Workers (RETA). The announcement has caused great indignation in the group. Raised from the beginning as a “progressive” system, the fees, however, will continue to be high from their lowest section (€600) onwards.

There is another option? Most likely not.

Reform. Let’s first turn to the table of income/contributions designed by the Ministry of Social Security between now and 2031. It is a progressive scheme where the self-employed with less “real income” (below €600 per month) would pay, at the end of the transition phase (nine years, a range highly criticized by all the parties involved in the negotiation) around €183 per month. More common earnings, such as the range that goes from €1,500 to €1,700, would pay €470.

At the extreme of progressivity are the self-employed with incomes of more than €4,000, sometimes entrepreneurs. His fee would amount to €1,200 per month in 2031.

Does anyone win? If we take the current fee as a reference, €295 per month in its minimum formulation, very few groups. In 2031, only the self-employed below €1,125 they would be paying less what, today. All the others would have observed a substantial increase in their quotas, to which the IPRF would have to be added. It is not surprising that the contribution table has generated a great stir and that some spokespersons for self-employed associations have defined the reform as “crazy“.

All this aside the technical dispute based on the contribution, whether it is the “real income” contemplated by the ministry (what is invoiced) vs. the “net income” claimed by the associations (the difference between what is invoiced and the deductible expenses, those that the self-employed inevitably undertake to carry out their work activity).

Can it be lowered? The Escrivá reform was proposed from the outset to design a “fairer” quota system. Lowering prices had always been a collective claim. A very old request was to adjust fees to income. It has been done. This is the result: are the self-employed condemned?

Probably yes. A good way to understand it is by looking at the taxes + contributions paid by each type of worker (self-employed vs. salaried). This article from Ayuda T Pymes is quite illustrative: in 2018 and on a gross profit/salary of €14,000, a self-employed worker paid €4,200 in taxes + contribution. An employee, however, barely covered €1,650 out of pocket. A priori, an incomprehensible gap between two identical “salaries”.

Self Employed And Salaried 2

(Aid T SMEs)

To the enterprise. What’s wrong here? The role of companies. The annual RETA quota of a self-employed person, of about €3,200, no matter how high it may be, will always be lower than what is contributed by the worker and the company after a year. Employers contribute 23.6% of their employee’s gross salary to the Social Security System, in addition to 5.5% for unemployment, in addition to smaller contributions to the Salary Guarantee Fund or for training purposes. At the end of the year, the company and the worker have paid €5,000. And with more advantages (more unemployment).

squaring the circle. In practice, the self-employed contribute much less to Social Security than employees. The problem lies in their loneliness: they are the ones who must bear for themselves what in other circumstances is a burden shared by the worker and the company. Hence, any reform of the RETA, no matter how ambitious and “progressive” it wishes to be, results in extremely high fees from an income-related point of view. The self-employed already contribute less (and still pay a lot).

How do they solve it in Europe? It depends a lot on the country, but where very little is paid for self-employment (€60 in the United Kingdom or €50 in the Netherlands), coverage is minimal. And when we speak of minimum, we are not referring to very limited unemployment, but to the obligation to take out private insurance to access healthcare (in Spain it does). Germany, where the fee is higher but lower than the Spanish, also requires the self-employed to pay for medical insurance.

In France, Denmark or Italy there is no fee and the annual calculation is made at the end of the year based on a percentage (often higher than the Spanish personal income tax). Again, social coverage varies, being more generous in the last two cases. But the general trend is similar: if you pay less, you access fewer services (some critical and included in Spain). The self-employed always compete in inferior conditions.

Image: lorenzo love


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