On 26 October 2017, a new Law on urgent self-employment reforms enters into force, with the exception of some articles and provisions whose entry into force has been postponed until 2018, as indicated throughout this document.
Given the importance of this regulation, we have briefly summarized the main reforms that are to be introduced:
Surcharge for late Social Security payments
From 1 January 2018, the surcharges applied to Social Security debts for late payment will be reduced. This amendment applies to all Social Security debts and not just those of self-employed workers.
If the settlement obligations are fulfilled but the contributions are not paid, the surcharge will be 10% during the first month following the due date. The 20% surcharge currently established for payments made from the second calendar month is maintained.
If the settlement obligations are not fulfilled and the contributions are not paid, the surcharge will be 20% if these are paid before the deadline established in the debt collection procedure or the settlement act: If they are paid after that deadline, the surcharge will be 35%.
For all the other Social Security debts that are not contributions, in the event of late payment, a surcharge of 20% will be applied in all cases.
Until now, self-employed workers who contribute on a multi-activity basis, that is, -when they carry out two or more work activities that require contributions in more than one Social Security Regime- for an amount equal to or greater than that set by the regulations may request the return of 50% of the excess, up to a maximum of 50% of the contributions deposited with the Special Self-employed Workers Regime (RETA). If the requirements are met, from now on, reimbursement will be made ex officio, and not at the request of the self-employed worker, by the General Treasury of Social Security before 1 May of the successive financial year.
Up until now, self-employed workers registered for the first time with the RETA or following a long delisted period, could benefit from the so-called flat rate for a fixed amount of 50 euros per month or a reduction of 80% depending on the contribution base selected. As of 1 January 2018, the collection period of the flat rate contribution for common contingencies of 50 euros per month is extended from six to twelve months, if the minimum base is selected. If the base chosen is higher, the 80% reduction period of the common contingency contribution is also extended from six to twelve months. After this twelve month period, the reductions and bonus remain the same as before.
In both cases, the time they were delisted from the RETA required to qualify for this rate is reduced from five to two years. If the self-employed worker has benefited from the flat rate during a prior listed period, the required non-contribution period is extended to three years.
The flat rate also applies in the terms previously set out for self-employed female workers who have ceased their activity for maternity, adoption, custody for adoption, foster care and guardianship leave and return to self-employment within the two years following the cessation.
Discounts for reconciliation of work and family life and for hiring relatives
A 100% contribution discount applies for self-employed workers who have to take care of minors or dependents as well as a 100% discount for a twelve month period for common contingencies business contributions for the indefinite contracting of family members.
In addition, 100% of the self-employed workers’ contribution will be deducted during maternity, adoption, foster care, paternity, high risk pregnancy or risk during breastfeeding leave, without the need for the self-employed worker to be replaced by a temporary worker, provided always that the rest period is at least one month.
Registration with the Social Security, payment per day worked and changes to contribution bases
From 1 January 2018, self-employed workers may be registered and discharged up to three times in the same calendar year by paying for days actually worked from the effective date of registration up to the effective date of discharge and not for a full calendar month, as was the case until now.
In addition, from this date the amount of times that it is possible to change the contribution base per year is increased from two to four times thereby adapting it to the income received.
Deductible IRPF expenses
As of 1 January 2018, an objective rule for the deductibility of supply expenses (water, gas, internet, electricity, etc.) is introduced for those cases where the taxpayer partially uses their habitual residence to carry out economic activities. A deduction of 30% will be applied to those expenses that correspond to the percentage of square metres of the house used for the activity.
Health insurance premiums that cover the taxpayer, their spouse and children under the age of 25 living with them will be deductible up to a maximum limit of 500 euros per person or 1,500 euros for each of them with disabilities.
In addition, maintenance expenses of the contributor incurred while carrying out their activity will be deductible to extent that the following conditions are met; these take place in restoration and hospitality establishments, are paid using electronic means and do not exceed the limit of €26.67/ day if the expenditure is produced in Spain and €48.08/day if it is abroad. These limits will be double for overnight production.
Other relevant measures
- Coverage of professional contingencies including accidents on the way to/from work is extended.
- Self-employed workers who have reached legal retirement age and prove that they have hired at least one employee can reconcile payment of 100% of their retirement pension with maintaining their activity.
- As of 1 January, self-employed workers will be obliged to set up a direct debit for payment of the contributions.
- The minimum contribution rate of self-employed companies (those with at least 10 employees), will be set annually by Budgetary Law and will be dissociated from the minimum group 1 contribution base of the general scheme.