Next year 3.3 million self-employed ‘Autonomous’ workers in Spain, are poised for significant adjustments, encompassing alterations to social security payments, VAT reporting, and income tax filings.
In tandem with the changes to social security payments, Spain's autonomous workers will also witness modifications in income tax returns.
Starting in 2024, all self-employed individuals, regardless of income, are mandated to file their Income Tax Returns known as ‘Declaración de la Renta’. This marks a departure from the previous requirement, where filling was obligatory only for those earning an annual net income equal to or greater than 1,000 euros. This shift aims to streamline tax reporting and enhance transparency across all income brackets.
Social Security Payments
In 2023, a shift was initiated, transitioning social security payments from a fixed amount to real earnings-based calculations. This practice will persist in the upcoming year, with adjustments corresponding to income levels.
In 2024, reductions in payments are planned for those with lower incomes, while higher earners will see an increase. Social security fees for individuals earning 1,300 euros or more will observe a decrease ranging from 3 euros to 10 euros monthly. Conversely, those earning over 1,700 euros monthly will encounter a 2.5 percent to 6 percent increment. For example, an autónomo earning 2,030 euros monthly will witness a 10 euro per month rise in 2024.
VAT Reporting and European Directive 2020/285
The alterations in reporting VAT are rooted in the transposition of European Directive 2020/285, which came into effect in 2020. The directive aims to reduce administrative burdens on self-employed workers by exempting those who invoice less than 85,000 euros annually from quarterly VAT statements. While the changes begin implementation in 2024, full compliance is expected by January 2025. This allows self-employed workers to choose between the conventional VAT regime and the newly introduced special franchise regime, offering flexibility in tax reporting.
Zero Social Security Payments in Specific Regions
In 2024, newly established self-employed individuals in the Canary Islands, Extremadura, and Galicia will join their counterparts in select Spanish regions, such as Madrid, in enjoying the exemption from initial social security payments upon registration.
Canary Islands: Effective January 1st, 2024, the Canary Islands will implement a zero quota system. The region will fully subsidised Social Security contributions for new self-employed workers during the initial two years. Furthermore, an additional year of subsidy is available for those earning less than the Minimum Interprofessional Wage (SMI). Eligible self-employed workers must fulfil certain criteria, including not being registered in the preceding two years, having no outstanding debts, not engaging in two distinct professions, and not invoicing through a cooperative.
Extremadura: New self-employed workers in Extremadura will receive financial support amounting to 960 euros annually, earmarked for social security contributions. To qualify, individuals must sustain their business in the region for two years, refrain from serving as a director or administrator for a commercial company, and avoid employment with partners of public limited companies or civil societies. Registration during the second quarter of 2022 in Extremadura's system is an additional qualification criterion.
Galicia: Starting in 2024, all newly established self-employed workers in Galicia will benefit from the zero quota system. During the inaugural year, 100 percent of social security payments will be subsidised. The Xunta will invest €9.6 million into the initiative, which is anticipated to aid approximately 10,000 new self-employed workers in the region.
Digital Improvement Funding and Kit Digital
Starting in the upcoming year, Spain's Kit Digital will expand its scope to encompass communities of property owners and civil societies. This program offers vouchers to small businesses and self-employed individuals, facilitating endeavours such as website creation and marketing initiatives. Eligibility for the kit is accessible to communities and civil companies with a workforce of fewer than 50 employees, adhering to the overarching requirements of the Digital Kit Program. The application window for this opportunity remains open until December 31, 2024.
Delayed Implementation of Digital Invoices
While the Create and Grow Law laid the groundwork for mandatory electronic invoices for certain businesses, the delay in implementation provides a grace period for adaptation.
Self-employed workers and companies with an annual turnover exceeding 8 million euros, now have an additional year to transition to electronic invoicing. The decision to postpone this mandate acknowledges the complexities of such a transition and the need for businesses to align with digital invoicing practices gradually.
In conclusion, the upcoming changes reflect Spain's commitment to fostering a more dynamic and supportive environment for autonomous workers, addressing taxation, social security, and digital adaptation in a comprehensive manner. These reforms aim to balance regulatory requirements with the practical needs of a diverse and evolving workforce.
January 10, 2024