Escrivá's new proposal for the self-employed: new change in taxes and more deductible expenses

The new approach raises taxes for those who earn less and lowers taxes for those who earn more

3 min
José Luis Escrivá, during the interview.

MADRIDThe rejection by self-employed organisations of the new "real income" tax system has led the Spanish government to make a move. The Ministry of Inclusion and Social Security, headed by José Luis Escrivá, has brought changes to the negotiating table with the organisations of the self-employed (ATA, UPTA and UATAE) regarding the calculation of the clean yields –or "real income", in the language used in the negotiation–, as well as regarding the tax that self-employed workers have to pay, according to different sources familiar with the negotiations. From the outset, however, the organisations have been reluctant, and complain that the proposal has only been made orally and are waiting to receive a text.

After a new meeting held this Wednesday, the ministry has opened the door to modify the concept of clean yields, one of the main obstacles in the negotiations. The Ministry has raised the possibility that workers can deduct more expenses when calculating this income, as requested by the sector's associations, especially the Association of Self-Employed Workers (ATA), linked to the CEOE. The Social Security would also allow more deductible expenses, ministry sources confirm, although they have yet to decide what these expenses would be.

It should be born in mind that what the executive proposes with the reform is to to divide self-employed workers into 13 brackets according to their earnings to determine whether they have to pay a lower or higher tax rate. For this reason, it is essential to determine what "real income" is..

New rate proposal

One of the other "substantial" novelties has to do with the fees that each bracket would pay. Unlike the current model, in which, regardless of income, all self-employed workers pay a monthly flat rate of €294, the new system would link tax workers' earnings. In the ministry's latest proposal, highest earners (earning over €4,050 per month) would pay €991 in taxes per month. This is €200 less than in Escrivá's first proposal. On the other hand, those making under €600 would have to pay €214 per month (the previous proposal was €184).

Finally, taxes would also be reduced for those making between €900 and €1,500 (the bracket with the largest number of self-employed workers), although there are no specifics at the moment. All these figures are not yet final and the different parties in the negotiation remain very cautious.

For UPTA, one of the progressive self-employed organisations, the proposal put forward by the ministry is "insufficient". "We want there to be substantial savings for the self-employed who have lower incomes," said the president of UPTA, Eduardo Abad, coming out of the meeting. "The upper brackets are the ones that ought to pay higher taxes," Abad said.

For ATA, the problem also lies in knowing the performance of the corporate self-employed (about 200,000), who, as the Treasury explained to this newspaper, do not declare their net income as self-employed. As a general rule, they do it through corporate tax and, therefore, are halfway between the two systems. "[The Spanish government's proposal] is a fictitious system," ATA denounces.

The Ministry of Inclusion and Social Security insists that with the changes introduced two out of every three self-employed would pay the same or less than now, with a special incidence among women and young people (in both groups, three out of every four workers would pay the same or less, according to the Spanish government's estimates). The central government insists that it is a "comprehensive" reform of the protection system for the self-employed to reverse anomalies such as low pensions. The average pension among the self-employed is 40% lower than for salaried workers.

However, the executive still has until the summer of 2022 to approve a reform it promised Brussels in the recovery plan it sent for the European funds, which should come into force in 2023.