The new contribution system for the self-employed that has begun to be implemented in stages in 2023 clearly affects self-employed companies. The legislator, aware that the majority of this group has always been paying the minimum rate and has not been able to enjoy any kind of bonus, has wanted to assimilate them to the rest of the self-employed in this new system based on real income.
There is another post on our blog detailing the changes, not only in terms of bases and contributions, but also in terms of new benefits.
With the new system approved, the self-employed will have a minimum contribution base that has been set at 1,000 euros per month with a resulting contribution of 310 euros per month in 2023. This value of the minimum contribution is lower than at present. Self-employed companies now pay 377.87 euros per month in minimum Social Security contributions. This change translates into an annual saving of 814.44 euros.
However, if the intention is really for the self-employed to also pay contributions based on real income, the amounts they receive as remuneration from the company will affect the basis on which they will have to pay contributions. This is a key point that will directly affect a multitude of small and medium-sized companies in which the roles of ownership, shareholders and the people who carry out the work are mixed.
If this is your case and you want to start to put your affairs in order by separating your family and professional assets and carefully review your shareholding and shareholdings, taking into account how this affects your tax burden and costs such as self-employed contributions, contact us, we can help you.
In the following two years, 2024 and 2025, the minimum base for this group will be established in the General State Budget. From 2026 onwards, they will be assimilated to group 7 of the General Regime (currently administrative assistants) where their contribution base will be indicated.
What is a corporate self-employed person?
A corporate self-employed person is a self-employed person who has set up a commercial company. Not all partners are obliged to be in this regime, the law establishes the requirements but those who are obliged must pay contributions even if they receive a salary from the company for work carried out.
When there are several partners or administrators, the question often arises as to who must register with the company. These are the cases contemplated by the law:
- Holding at least 25% of the company’s capital and carrying out management tasks.
- Holding at least 33% of the capital and working in the company.
- Not owning shares, but living with one of the partners with at least 50% of the capital.
A substantial difference from the corporate self-employed is the limitation of liability. A self-employed natural person has unlimited liability, i.e. if the economic activity incurs debts, the self-employed person must respond with all his/her present and future assets to these debts. A commercial company allows this liability to be limited.
When talking about partnerships and self-employed companies one may think of large companies and corporations but the reality is that the vast majority of S.L.’s in Spain are small companies and businesses with few partners who also work in the company and are paid for their work. It is therefore surprising that the administration has not yet published a specific guide for this type of self-employed.
Calculation of the 2023 self-employed company tax rate
The new system establishes that the calculation of the contribution based on real income must be carried out in the same way as for any other self-employed person. They will be subject to a contribution bracket based on income, respecting the minimum base of 1,000 euros.
The main new feature is that when calculating the net income of the corporate self-employed, they have the possibility of deducting 3% for non-justifiable expenses, instead of 7% like the self-employed individuals.
With the new system, the self-employed must estimate their expected net income for the year (between 1 January and 31 December 2023), leaving behind the times when it was possible to carry out a precarious management without worrying about keeping up to date accounts.
The Social Security has established a formula for determining this amount. This would be as follows: first calculate the annual net income from the activity (income minus deductible expenses), then add all the social security contributions paid by the self-employed during the year, and apply a 3% reduction for expenses that are impossible to justify. Once the figure is obtained, it is divided by 12. The result is the net monthly income for which they will have to pay contributions.
What happens if we decide not to adjust the base to the actual income?
There are two options: make adjustments during the year on a voluntary basis or the TGSS will automatically regularise the following year when it cross-checks the data obtained from the AEAT income tax return with the contributions paid. The recommendation is always to regularise voluntarily in the same year to avoid surcharges.
Can the company pay the self-employed contribution?
Although it is a widespread practice, the reality is that it is a mistake to decide that the company should be responsible for the payment of the members’ contributions.
The right thing to do is to take this cost into account in the remuneration agreed and to have the self-employed partner pay his or her own self-employed fees.
The expense is not lost, on the one hand the salaries are deductible expenses for the company and on the other hand the self-employed fee is deductible for the partner’s income tax return (IRPF).
Types of corporate self-employed
Self-employed persons who are managing shareholders
They hold at least 25% of the company shares and play the role of executive management of the business.
Remuneration will not be in the form of a salary but as an invoice issued on a monthly basis.
In cases where they hold less than 25% of the shares, it is possible to issue a monthly payroll but they will not be paid under the General Social Security Scheme, but under the Assimilated General Scheme.
Self-employed without executive roles
In these cases it depends on the % of shares held, as a general rule:
- Less than 33% of the company’s share capital: if the partner works in the company, he/she will be able to contribute and be registered in the General Social Security Scheme.
- More than 33% of the company’s share capital: the partner must register as self-employed and issue an invoice to the company every month.
There are other limitations for partners who live with other partners, and since 1 January, partners belonging to professional partnerships must contribute under the Special Regime for Self-Employed Workers and issue invoices regardless of the capital they hold in the company.
Self-employed professionals: issue invoices or pay slips
A common confusion is whether a self-employed person must issue an invoice or have a payroll like any other employed person.
The Directorate General of Taxes (DGT), in binding communications (V1147-15 and V1148-15), clarifies that a corporate self-employed person must issue an invoice when carrying out independent work and that this invoice must include VAT.
The DGT understands that it is independent work when:
- He/she uses his/her own means and resources to carry out the activity.
- The tasks performed do not form part of the organisational structure of the company, as would be the case for an employee (they organise their own working hours and holidays).
- They bear the economic risk of their activity independently. If, for example, a client does not pay an invoice of the self-employed, the company will not cover the debt.
- It has a contractual responsibility towards its clients.
When these assumptions are not met, the corporate self-employed person must receive a salary and not issue an invoice. This does not mean that he/she should not be registered as self-employed with the Social Security. He/she must still be registered with the RETA (General Regime for Self-Employed Workers) of the Social Security and pay his/her contributions.
Unfinished business with the administration
There are many. The regulation has not gone down to clarify points such as, for example:
- What happens to partners who work for several companies with shareholdings of more than 25%.
- What happens to self-employed partners who also work as employees in other businesses.
The final conclusion is that if you are a corporate self-employed, the best option is to have an advisor who can give you a global vision taking into account taxation (yours and the company’s) and changes in labour legislation to avoid problems in the future.
Do not hesitate to contact us if you would like advice on this new system and how it may impact your economic activity.
