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In Spain there are basically two ways the social security services will make you pay your contributions. The first is as an employee: your contributions will be withheld from your earnings and listed on your pay slip as part of the régimen general. Or, if you are an entrepreneur registered as an autonomo (freelancer), you will have to pay your contribution directly within the Régimen Especial de Trabajadores Autónomos (RETA).
You are required to pay RETA if you fall in one of three broad categories:
- If you work as a freelancer to earn money.
- If you are an independent professional that requires incorporation in a professional union as do doctors, lawyers, etc.
- If you effectively control or administrate a mercantile corporation and exercise executive or managerial functions.
Rights vs. Obligations
The above might seem relatively straightforward, but historically, there have been significant differences between the rights and obligations of freelancers and professionals (autónomos personas físicas) versus those of company shareholders and administrators (autónomo societario). The differences between the rights of employees, freelancers, professionals and corporate administrators have been a source of conflict that has largely been rectified over the last 10 years or so, but there are still some significant differences in terms of obligations. Very briefly, those differences are:
- The minimum monthly contribution for autónomos personas físicas is considerably less (currently €286.15) than the minimum monthly contribution for autónomos societarios (currently €367,80).
- Social security costs are fiscally deductible for autónomos personas físicas but not for autónomos societarios who must pay it privately.
- Autónomos personas físicas are entitled to a subsidy of social security contributions (called the tarifa plana) for the first two years of activity but autónomos societarios are not.
A Change in the Law
There has been ongoing discussion about these issues for some time. But, now the topic has gained a sense of urgency. The marked decrease in economic activity across multiple sectors caused by COVID-19 is hurting business, and governments are being asked to help entrepreneurs survive.
But there is some good news. The Spanish high court of justice recently ruled that autónomos societarios should also be entitled to the benefits derived from article 31 of the law Ley 20/2007, de 11 de julio, del Estatuto del trabajo autónomo.
In practice, this means that autónomos societarios now have the same rights as autónomos personas físicas regarding the subsidies available for new entrepreneurs. The subsidies currently in place are as follows:
- First 12 months: €60 or 80% discount on contribution.
- 13-18 months: 50% discount on contribution.
- 19-24 months: 30% discount on contribution.
An additional 12 months at a 30% reduction are added if you are a male 30 years old or younger. For females, the 30% reduction is also extended for 12 months if you are 35 years old or younger. This can translate into a savings of over €6,000 when compared to the previous regulations. This is not only good news for new autónomos societarios but also for recent ones, as missed or unacknowledged subsidies can be claimed up to four years later.
In these challenging times, this is a welcome relief and a concrete, tangible measure that we recommend taking advantage of. At the same time, we continue to lobby for more progress to be made on the remaining discrepancies.
If you would like more information on this topic or if you need help handling your request for a refund, you can contact BCN Business Services via the website at bcnbs.com, by phone at +34 934 802 919, or by appointment at Avinguda Diagonal 508, 2-2.
BCN Business Services is an English-speaking consultancy firm providing complete services to foreign entrepreneurs in Spain. Areas of expertise include immigration, registration, company formation, accounting, taxes, personnel administration, real estate, insurance and related legal issues. You can learn more at bcnbs.com and follow on LinkedIn.
Sponsored by BCN Business Services.