Being an autonomous (self-employed worker) in Spain can be challenging, given the high social security payments you have to pay every month and the bureaucracy that’s involved.
But is it actually necessary to register and pay tax if you’re earning below the minimum wage every month?
In 2022, Spain’s Interprofessional Minimum Wage (SMI) is €1,000 per month if you’re paid in 14 instalments and €1,116 if you’re paid in 12 instalments throughout the year.
According to the Spanish news site The Objective, two-thirds of self-employed workers in Spain, around 2.2 million of the 3.3 million registered, earn below minimum wage.
Currently, contract workers in Spain who earn €22,000 or above must present an income tax return and those whose annual income is less than €22,000 will be exempt from filing a tax return.
However, if you’re autonomous, you will still need to complete file the income statementeven if you have earned under €22,000.
The question of whether you need to register as self-employed in Span and pay tax even if you earn minimal amounts has been asked over and over again and is a bit of a grey area, with many lawyers not even being able to give a straight answer.
Take freelancers who are just starting out and are in the process of growing their business but who are not yet making enough sales to reach minimum wage. It could also be self-employed workers who are going through a period of financial difficulty or those who only work periodically such as language teachers, who may only give a few classes a week.
What does Spanish law say?
In 2007 the Supreme Court issued a ruling stating that it was not necessary to register as autonomous if you’re earning below minimum wage. Since then, there have been several self-employed workers who have won cases arguing and proving that they earned less than the SMI.
However, there is no exact law on this and in 2018, Spain’s Social Security department issued a ruling stressing that everyone had to register as self-employed, regardless of the amount they earn.
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According to InfoAutonomos, a website designed to help Spain’s self-employed: “The problem arises because the obligation to register as self-employed is independent of the level of income and the time dedicated to a work activity”.
Spanish Social Security legislation states that “you must register as self-employed if you regularly, personally and directly carry out an economic activity for profit, without being subject to an employment contract, even if you use the paid service of other people, whether or not you are the owner of an individual or family business”.
This means that you are supposed to register if you work on a regular basis, but you could still be earning below the minimum wage, whether you are working 40 hours a week or just for two afternoons a week.
The reality is that if you are not registered properly then you cannot legally issue invoices to clients in Spain and therefore cannot be earning anyway. You can issue invoices to clients abroad though, but may still not be earning enough to meet the Spanish minimum wage
Even if you do not exceed Spain’s SMI, if you issue invoices every month, Spain’s Social Security Ministry and the Hacienda tax agency can potentially find out if you’re not registered. Other companies who you invoice will have a record that they’ve paid you and this will be submitted along with their quarterly tax returns.
There could be hefty fines to pay if you’re not registered when you’re supposed to be, but the amount will depend on individual circumstances.
READ MORE: What are the fines and prison sentences for tax evasion in Spain?
Social Security payments
The main issue with having to register as an autonomous when you’re earning so little is that you have to pay monthly social security fees, regardless of how much you earn each month.
This means that someone who is earning below minimum wage is still having to fork out €289 per month (€60 for the first year). Even if they earn nothing one month, they are still obliged to pay the social security fee.
Although these payments are set to change in 2023, those earning below minimum wage are still going to have to pay out a considerable amount.
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What about paying taxes?
As an autonomous you pay your taxes every quarter as well as VAT.
You will pay 19 percent income tax on yearly earnings from €0 up to €12,450, 25 percent on earnings from €12,451 to €20,200, 30 percent on earnings from €20,201 up to €35,200 and 37 percent from €35,201 up to €60,000.
As you can see, this means that even if you’re earning below the minimum wage and get less than €12,450 per year, you still have to pay 19 percent in tax.
When you fill out your yearly tax return, usually in June for the previous year, then Spanish authorities will calculate how much tax you’ve paid in total. If you’ve paid too much, which is likely if you earn below minimum wage, then you will get paid some of your tax back. What you won’t get back though are the social security payments.
What are the solutions?
It is quite difficult as there are one-size-fits-all solutions, only certain actions you can take to make the financial situation easier for you.
You can deregister from being autonomous up to three times per year. This means that if you think there are certain months you will be earning below the SMI, then you can deregister.
READ MORE: How to de-register as autónomo in Spain
However, instead of just not declaring amounts earned, you invoice for them later when you do register. If you can make sure you hold out and invoice for several payments together, you can make sure you earn enough for that month to be able to pay the social security fee and the tax.
Keep in mind that even though you are paying out a lot, there are several benefits to registering as self-employed and paying your social security and taxes. You are eligible for state healthcare, you can get sick pay, plus maternity or paternity pay.
You may also be able to get special financial benefits, as what happened during the Covid-19 pandemic when lots of autonomous saw their earnings drop dramatically and got help from the government (but only if they were registered).