- The €50 flat rate for new self-employed workers is extended from six to twelve months.
- Surcharges for paying contributions late fall, and registrations and deregistrations can take effect from the actual day.
- Income tax deductions also change: home utilities used for the activity and meal expenses.
On 11 October 2017 the Senate unanimously passed the Urgent Reform of Self-Employment Act, which thus completes its parliamentary passage and awaits royal assent and publication in the official gazette. It will enter into force the day after publication, although some measures will not be available until 1 January 2018. The Congress of Deputies had approved it before the summer.
The law brings together measures on social security, work-life balance, training and taxation for the self-employed, one of the largest groups in the Spanish labour market. Its preamble starts from an observation: a self-employed person’s income is not fixed but uncertain and variable, and their social security obligations must be adapted to those circumstances to ease contributions and reduce administrative burdens.
Contributing more flexibly
The best-known measure is the extension of the reduced €50 contribution, the so-called flat rate, for those starting an activity: it goes from six to twelve months and is coordinated with other existing benefits. Surcharges for paying contributions late are also reduced: if payment is made within the first calendar month after the due date, the surcharge falls to 10%, half of the previous 20%.
In addition, up to three registrations a year are allowed to take effect from the actual start of the activity, rather than from the first day of the month, and the number of times a year the contribution base can be changed rises from two to four, to match fluctuations in income. These changes, however technical they may seem, directly affect the cash flow of someone starting out or with irregular income.
Tax changes in income tax
The law amends personal income tax to clarify the deductibility of certain expenses. Utilities for the part of the home used for the activity will be deductible by applying 30% to the proportion between the square metres used for the activity and the total floor area of the home, unless the taxpayer proves a higher or lower percentage. Expenses arising from owning the home, such as property tax or community charges, were already deductible in proportion to the part used.
It also clarifies the deduction of the self-employed person’s own meal expenses in carrying out their activity, provided they are incurred in restaurants and hospitality establishments and paid by some electronic means of payment. The daily limits are the same as for employees: €26.67 in Spain and €48.08 abroad, amounts that double if an overnight stay is also involved.
What to review
If you are thinking of registering as self-employed, it is worth considering the timing: with the new flat rate and with effect from the actual day of registration, starting costs less, but the full contribution will come later, and it helps to calculate in good time the real profitability of the business at that level of contribution. Self-employed people already active can review their contribution base in the light of expected income, since they will be able to change it more times a year.
On deductible expenses, the general criterion remains that there must be a link to the activity and documentary justification. Before applying the utilities percentage or deducting meals, it is worth confirming with your adviser that the conditions are met, especially electronic payment, and that the part of the home used is properly determined and documented, because the administration can check it.
Contributing in line with real income is the spirit of the reform; making use of it requires reviewing the numbers before deciding.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
