The new contribution system for the self-employed in the Basque Country as from 2023

We are not very aware, national self-employed and foreign self–employed, but the reality is that, as of January 1, 2023, the New Contribution System will come into force both in the Basque Country and in the rest of Spain.

Until December 31, 2022, the Social Security contribution system has been characterized by its flexibility. The self-employed historically chose the lowest contribution bases to increase the amount when the contribution date was approaching in time.

The minimum amount to which the self-employed have generally adhered is 295 euros, contributing at the lowest base. This will influence future retirement pensions, which will be low. This is one of the main reasons why the Government has placed this new system.

1- General characteristics of the new contribution system in the Basque Country as from the first of January 2023

• The tendency is to equate the contributions of a self-employed worker (self-employed) to those of an employee (salaried worker).
• In principle, the system will be valid for the fiscal years 2023, 2024 and 2025, its effectiveness being evaluated and with the possibility of extending it until 2035 depending on the response of the self-employed

2- Contribution brackets and concept of yield 

• The system is now divided into 15 contribution brackets according to the income obtained.
• The full income is not the income generated. The full yield will be the result of income minus deductible expenses.
• The yield will determine the bracket in which we are among the 15 and the quota to be paid.
• The minimum bracket corresponds to a quota of 230 euros, corresponding to the current minimum annual salary (SMI) of 14.000 euros.

3- Calculation of the full yield

The formula is simple: 

• Income – deductible expenses = preliminary income
• Preliminary Income – 7% deductible expenses without justification = full yield. 
• Preliminary Income – 3% deductible expenses without justification -in the case of corporate self-employed- = full yield.

On this amount, the full yield, the tables give us a minimum amount to pay. 

The reality, and what we must keep in mind, is that the amount that we will have to pay to the Social Security is 30.6% and not the minimum amount shown by the tables. 

Let’s see an example:

Full income for the month	2.000 euros
Deductible expenses for the month	200 euros (the social security contributions themselves are not taken into account)
Previous result	1.800 euros
Reduction 7% Unjustified expenses (126)	1.674 euros
Minimum contribution according to tables	310 euros
“Real” contribution according to 30,16%	511 euros
Difference to compensate	201 euros

In this example we see how the tables “do not tell the truth”. At some point in the year, or in the following year when the Social Security has proof, the applicable % will be increased. 

The Social Security contribution to be paid for that month would be 30.6%*1,674 euros = 511 euros.

If you want to consult the contribution tables for 2023, you can do so here.

4- Calculation of the annual yield for 2023

First, it should be noted that there is no legal obligation during the first months of the year 2023 to report to increase or decrease our contribution. The Social Security will take the contribution that we were paying by default. 

In this official link you can calculate in an approximate way your yield for 2023. 

With this estimate, we will have a general idea of how much our monthly contribution will or will not increase. 

Let’s see it with an example:

Annual income	20.000 euro
Annual expenses	2.000 euro
Previous result	18.000 euro
– 7% of non-refundable expenses	16.740 euro
annual average 16,740 / 12	1.395 euro
Amount to be paid according to tables	300 euro
Actual amount on 1,395 euros (*30,6%)	426 euro

Therefore, at the end of the year, if we have paid the Social Security contribution according to the amount indicated in the tables, this will be a forecast. 126 euros will remain to be paid to Social Security for that month (annual computation 126 * 12 = 1,512 euros).

5- Changes in contributions during the year and compensations

• The Social Security has launched, through its web site, the Import@ss application. We will be able to do all changes from it.
• Every two months it will be possible to change the tranche. That is, up to 6 times a year. For this purpose, between January 1st and February 28th, it will be possible to change (increase or decrease) the bracket on which to pay contributions.
• For the first “bimonthly” of the year it is possible not to inform.

6- Obligation to report quota changes

• There is no obligation to inform the Social Security, at least during the first months of 2023.
• If we do not do so, the Social Security will understand that we are contributing for the minimum of 230 euros. 
• This is a forecast, since, at the end of the year, if our income is higher than the minimum interprofessional wage, the contribution will be higher, hence, it will be requested.
• There are two options, therefore: (i) not to report and continue contributing as before, or (ii) to report once Import@ss is enabled and update our contribution base. 
• Obviously, we may think that it is better to keep the money in our pocket and pay what is pending when it is due. However, if during the minimum contribution process a sick leave is taken, the benefit obtained will be higher or lower depending on the amount of the contribution.

7- What happens with the flat rate for the self-employed from 2023?

• The flat rate is increased to 80 euros for the first self-employee year. 
• In the second year, these 80 euros will be maintained, only if the net income does not exceed 14,000 euros (the annual minimum salary SMI of 14,000 euros). If the income obtained in the second year of activity is higher than this annual amount, contributions must be paid for the actual yield.

8- What happens with the flat rate for the self-employed registered before 2023?

• It has been informally reported that the benefits of both the first and second year of the subsidized rate for self-employed workers (over 2021 or 2022) will be maintained.
• However, with less than a month to go before the entry into force of this new system, this is unofficial information. 

9- What benefits do I have for being in the Basque Country?

• The BATUZ electronic invoicing system is compatible with these new quotas during 2023. 
• New registrations in self-employed will be able to benefit from 2022 with the so-called Beckham Law in the case of fulfilling a series of requirements. 

Do not hesitate to write to us if you have any doubts or comments at [email protected].