Spain's self-employment sector continues to experience growth, with a staggering 3.3 million individuals currently opting for this career path. For foreign nationals living in Spain, self-employment is an attractive option, with more than 400,000 currently registered as autónomos, comprising 12.3% of the total number according to the Spanish government's Social Security Regime (RETA).
However, being your own boss can be challenging, with various hurdles and pitfalls to navigate. One such obstacle is of course taxes, with many self-employed newcomers questioning whether they still need to register and pay taxes if their income falls below the minimum wage threshold, commonly known as the SMI (Salario Mínimo Interprofesional).
What is Spain’s minimum wage for 2023?
In Spain, the minimum wage for 2023 is €1,080 per month if paid in 14 instalments, or €1,260 if paid in 12 instalments throughout the year.
Interestingly, it is estimated that around two-thirds of Spain's 3.3 million registered self-employed workers, or roughly 2.2 million individuals, earn less than the minimum wage.
Will I have to register if I do not earn the minimum wage?
The question of whether self-employed individuals in Spain must register and pay taxes, even if they earn well below the SMI, remains a topic of debate with no clear answer. This is a concern for new freelancers who are in the process of growing their businesses but have not yet generated sufficient income to reach the minimum wage threshold. It also affects self-employed workers experiencing financial difficulties or those who have sporadic work opportunities, such as part-time freelancers.
With the minimum monthly social security payment for the self-employed currently around 294 euros per month, it is a payment that many self-employed workers, particularly those on a lower income, could well do without paying.
As a rule, when registering as a self-employed individual you have to do so at both the Treasury and with the Social Security (RETA) for monthly social security payments.
However, it is common for people to register as self-employed with the Treasury but NOT register with the Social Security avoiding the monthly payments.
According to a Supreme Court ruling in 2007, individuals earning below the minimum wage threshold are not required to register as self-employed in Spain. However, there are many exceptions to this which could potentially catch people out.
It may depend on whether your self-employed work is defined as ‘regular’ or not
Spain’s Social Security system defines the self-employed as “those who carry out an economic activity for money on a regular, individual and direct basis.”
Although many professionals have no doubts about registering with the Special Regime for Self-employed Workers (RETA), there are circumstances when the law requires some interpreting to understand its reach.
One such circumstance is the ambiguous criterion of "on a regular basis," which is not clearly defined. As Rafael Pardo Gabaldón, an advisor in the legal department of the National Federation of Self-employed Workers (ATA), puts it, "The truth is that this is a rather ambiguous criterion."
If you need to invoice a client, you MUST register with the Treasury using forms 036 and 037. This is a strict requirement if you are going to be invoicing.
The fact is if you are doing self-employed work and not invoicing you are most likely working illegally anyway. So if you are undertaking ANY self-employed work, it is clear that you should register yourself with the Treasury.
The truth is that if you undertake any self-employed work and don’t register with the Treasury or Social Security departments, you could end up with some legal issues and it is possible that you could be fined or at least made to pay back any unpaid taxes and social security payments.
As it is such a grey area, we would encourage you to speak to a tax advisor or accountant in Spain to ascertain whether or not you should register and file a tax return.
How much tax will I pay?
As a registered self-employed worker in Spain you have to submit and pay your taxes and VAT quarterly, however, you still need to submit a yearly tax declaration. In 2023 this needs to be done between April 11 and June 30 for the previous year.
As of 2022 the following tax rates apply:-
How much will my monthly social security payment be?
The primary challenge faced by those who must register as autónomos while earning very little income is the requirement to pay monthly social security fees.
Until this year, the fee was a fixed amount, regardless of one's earnings. This resulted in individuals earning less than minimum wage being obligated to pay €294 per month (€60 for the first year), even if they had no income in a given month.
Starting in 2023, the fixed fee of €294 will be replaced by a progressively decreasing fee for lower earners, reaching €200 per month, while higher earners will pay a progressively increasing fee, up to €590 per month. Spain's Ministry of Employment and Social Security will adjust the rates for each income group annually, and they have already released the rates for 2023 through 2025.
However, this means that in 2023, individuals earning less than €670 per month (below the minimum wage) will still be required to pay €230 in social security fees.
Learn more about the recent changes to the social security payments for the self-employed.
Whether you need to register as self-employed in Spain and pay social security is very much a grey area.
If you do very little self-employed work and have a minimal income, you may still be liable to pay the monthly social security fee which could eat into any profits you may have made.
If you are considering becoming self-employed, it is wise to speak with a tax specialist in Spain so you can determine the requirements for you to register and pay your taxes.
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