Changes to Spanish labour law for self-employed

Changes to Spanish labour law for self-employed

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Business owners and self-employed workers can take advantage of new labour measures that were implemented by the Spanish government in 2014.

New measures affecting national taxation and overall business strategy were approved on 23 December 2013 in order to promote entrepreneurship and stimulate the Spanish economy throughout 2014.

When you start a new business in Spain, it is important to keep up to date with the latest measures accepted by the Spanish Government. In this section, business experts Tas Consultoria provide a summary of the key developments for this year, in line with the law 22/2013 of the General State Budgets approved for 2014.

Social security contributions

The minimum contribution base in 2014 has risen to 2 percent, making it EUR 875.70 a month. Some 80 percent of self-employed workers choose to pay the minimum social security, where an autonomo (self-employed worker) pays social security at 29.9 percent of the contribution base of EUR 875.70. In general, therefore, the share of self-employed workers for the minimum contribution will now amount to EUR 261.83 per month.

Additionally, the maximum contribution base to the General System has gone up 5 percent, making it EUR 3,597.00 a month or EUR 119.90 a day in year 2014. A self-employed worker could pay a base of up to EUR 3,597.00 a month and get a higher pension as a result. If you are going to pay into the Spanish system for 15 years minimum, it may be worth taking it into consideration. By paying a higher monthly contribution, this could significantly add to your pension.

Social security contributions for business owners in Spain

Social security bonuses and reductions 

Given the economic situation of the country, the Spanish Government has revised the reform on social security contributions in order to encourage entrepreneurship and self employment.

This reform has made it possible for all independent workers, regardless of their age and registered under the self-employment regime from September 30, 2013, to benefit from reductions and bonuses. The new measure reduces the social security flat rates:

  • For the first six months after registering: 80 percent reduction in the contribution, with a monthly contribution of EUR 52.03.
  • 7 to 12 months: 50 percent reduction in the contribution in the second half, with a monthly contribution of EUR 128.79.
  • 13 to 15 months: 30 percent reduction in the contribution for the next quarter, with a monthly contribution of EUR 179.96.

From January 1 2014, self-employed workers who are 47 years old, listed on the RETA and have a minimum contribution base price of EUR 1,888.80 per month, will only be able to increase their contribution base up to EUR 1,926.60 a month.

What’s more, self-employed workers working in the tourism sector will not have to pay 50 percent of the social security contributions of their employees on permanent contracts, in the months of March and November 2014.

Increase in dismissal costs

The Spanish government has decided to increase the cost of objective dismissal for small businesses. So, for the companies with fewer than 25 workers, the Wage Guarantee Fund (Fondo de Garantía Salarial FOGASA) will no longer take compensation for eight days of the dismissal. Companies will therefore have to pay for the total dismissal of the employee, which currently is 20 days compensation per year worked.

Minimum wage

The minimum wage (Salario Mínimo Interprofesional SMI) has been maintained for 2014 and is set at EUR 645.30 a month, which is EUR 21.51 a day.

Spanish tax reform for business owners

Income Tax (Impuesto sobre la Renta de las Personas Físicas, IRPF)

Tax cuts and employment creation incentives for 2014 have been put forward to boost Spain’s economic recovery. For that reason, new companies and entrepreneurs setting up new businesses get a 20 percent reduction in net income for maintaining or creating jobs (art. 63 of the law 22/2013 of General State Budgets).

Corporate Tax Reform

Every year Spain revises the annual budget laws. This year, tax measures have been included in the new budget, and some measures that were introduced in recent years have been extended to increase tax collection.

The general tax rate applied to resident companies is 30 percent. In the case of small businesses, a reduced corporate tax rate of 25 percent is applicable for any taxable income under EUR 300,000. Any profit above this amount is taxed at the general rate of 30 percent. However, in order for this to be accepted, companies must have turnover less than EUR 10 million in the previous tax year. However, the reduced rate is available for a further three years to companies which formerly held a small company status and now exceeded EUR 10 million in turnover.

For tax years 2011, 2012 and 2013, small companies with a turnover of less than EUR 5 million a year with less than 25 employees can claim reduced tax for the fiscal year 2014 (provided they maintain or create jobs). Such companies will be taxed at a rate of 25 percent on the first EUR 300,000 of profit and 30 percent on the balance.

However, new businesses established from 1 January 2013 will benefit from a new corporate income tax at a reduced rate for Year 1 in which the company makes a profit:

  • 15 percent on taxable income up to EUR 300,000;
  • 20 percent on taxable income beyond EUR 300,000.

IVA reform

The value added tax (IVA in Spanish) is a tax that is the basis of the Spanish system of indirect taxation. VAT (or IVA) is imposed on the sale of goods and the provision of services. The Spanish Tax Authorities approved a new IVA reform that came into force 1 January 2014.

There are three different rates of IVA in Spain: the standard rate, the reduced rate and the specific rate:

  • The standard rate increased from 18 percent to 21 percent;
  • The reduced rate has risen from 8 percent to 10 percent for some everyday products (food, culture, transport, etc.);
  • The specific rate has remained unchanged at 4 percent (basic food, press, health equipment, etc.).



Source: Jonatan Carbonell, CEO and tax specialist of Tas Consultoria.

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