The Flat Rate for Self-Employed

The self-employed flat rate for € 50 is one of the advantages offered by the government for self-employed workers who wish to register for Social Security.

In Spain, a self-employed person is a worker who sells products and services, without being linked to any contract with any company since he is the owner of his own one-person legal entity through which he issues his invoices. If this is your case, you can access the flat rate that the Government has established for this modality so that you can enjoy the benefits of Social Security.

What is freelance flat rate?

The flat rate is a social and governmental measure by which as a self-employed person you pay a lower monthly fee with respect to the base rate to Social Security for a defined time. It was implemented in 2013 to encourage self-employment. Currently, this rate is 50 euros instead of 278.78 euros, which is the minimum that other workers invest.

More than 80? the self-employed decide to contribute for the minimum base of € 919.80 . This implies less protection for sick leave due to accidents, unemployment, illness and when applying for the pension.

It should be noted that the first measure only benefited those under 30 years of age. However, the group of self-employed in Spain pushed for the action to cover everyone, regardless of age. For this reason, since the entry into force of Law 14/2013 , you can enjoy the protection of your working conditions regardless of your age if you are a self-employed worker.

Whether you are a young man who has decided to be his own boss and has made an investment to work as a freelancer, or if he is a retiree who has retired and wants to have his own business with his savings, this measure is committed to entrepreneurship and self-employment since according to data from the Ministry of Employment, the self-employed flat rate has benefited 1,200,000 workers .

How does freelance flat rate work?

According to the Self-Employed Law ratified in 2017 by the Senate, the initial fixed payment is 50 euros for one year. Which represents a significant reduction and savings of 2,700 euros per year . If you enter this system, you must pay 600 euros during the first year compared to the 3,300 euros paid by employees of the traditional system.

During your second year, the installment bonus decreases by 50% in the first quarter, leaving the payment at € 137.92 per month . Towards the third quarter there is another reduction of 30%, so now you must pay € 192.79 each month. In other words, the second year will represent a total amount of 2,148.87 euros per year.

On the other hand, if you want to opt for a higher quote, the rate of 50 euros does not apply. The minimum base will be reduced by 80% in the first year. If you quote € 2,000, you are going to pay an amount of 378 euros per month, which means about 5,536 euros per year.

How to process a freelance flat rate?

Royal Decree Law 4/2013 with its respective modifications has established the following requirements for you to request the flat rate:

  • Not having been registered as a self-employed person in the last two years.
  • Not being an administrator of a commercial company.
  • Not be a religious member of the Catholic Church.
  • Not being a self-employed collaborator if they are part of the regime that protects the families of the self-employed.

The last three requirements are left to the discretion of the free interpretation of the General Treasury of Social Security . So if you do not comply with one of them, consult directly at that office or by phone.

On the other hand, the self-employed of the cooperatives can also request this benefit. If you comply with the multiple activity modality between your independent work and another job, the Entrepreneurs Law introduced new bonuses of 50? the self-employed quota for these modalities . It is your free choice to choose between the bonuses for multiple activities or the flat rate, since you cannot enjoy both.

Value of the flat rate for freelancers

Your freelance fee is calculated based on the contribution base that you have freely selected. The different contribution bases are published annually by the Social Security that sets the General State Budgets (PGE). This year, before the PGE was published, the minimum contribution base was 919.80 euros, which represents a monthly installment of 275 euros. While the maximum base was € 3,751.20 per year.

As explained above, the amount of the flat rate varies in three reduction sections based on the minimum base of what you quote and the temporary capacity, as follows:

  • In the first 12 months since 2018 : You must pay € 50 of the minimum contingency fee or 80% the bonus if you quote more than € 932.
  • From 12 to 18 months : The bonus is reduced by 50%, which remains at 59.4 euros per month.
  • 18 months to 24 months : It is decreased by 30%, leaving the base at 195.24 euros that must be paid each month.
  • From 24 to 36 months : New self-employed workers under the age of 30 and self-employed under the age of 35, receive a 30? the bonus.

In the event that you are a woman under 35 years of age or a man under 30, you have the right to a reduction during the 12 months following the termination of the flat rate, the effective date of your discharge equivalent to 30% resulting from apply the current minimum (29.80%) to the contribution base. You will enjoy this rate for a total of 30 months , uninterrupted.

If you reside in the Community of Madrid, the flat rate of € 50 has been extended to 18 months . When you turn 48, your contributions as a freelancer are limited: you must contribute the minimum 992.10 euros or the maximum of € 2,023.50.

News of the Urgent Self-Employment Reforms of 2018

As a freelancer, you can change the contribution base up to 4 times a year and when you sign up, you will only pay for the days you contribute in the first month. And when you unsubscribe, you will only pay the proportional fee of what was quoted during that month. On October 11 of last year, the new reforms to the Self-Employed Labor Law and General Budgets were approved unanimously in the Senate. Check these measures to verify if you meet the requirements to quote the flat rate.

The measures that came into effect as of January 2018 are the following:

  • The conditions for accessing the flat rate were relaxed. Now you no longer have to wait 5 years but 2 to quote again.
  • The flat rate for new self-employed was extended to 24 months .
  • The self-employed who undertook for the second time now have the possibility of enjoying the flat rate as long as 3 years have elapsed from the Special Regime for Self-Employed.
  • Self- employed mothers have the option of accessing the flat rate by starting their business again within 2 years after termination.

The 2018 Public Accounts expect to extend the flat rate for the self-employed of small municipalities in rural areas one more year. In this way, self-employment is encouraged in urban centers with fewer than 5,000 inhabitants.

Other modifications to the Self-Employment Promotion Law were established as follows:

  1. Freelancers who work in a company will not be able to receive the bonus if they hire staff.
  2. The fee for common contingencies of the flat rate is set at € 50 in the first 6 months.
  3. People who are victims of terrorism, gender violence or who have a proven disability can benefit from the flat rate for 12 months .

Flat rate for freelancers in 2020

Currently, the 2018 law continues in force, so in 2020 the same criteria apply as so far with the flat rate for self-employed. In any case, we live in a time of political uncertainty where the left is a majority in the Congress of Deputies and the right in the Senate, so changes in state budgets are difficult and therefore surely we will have to wait for some. new elections for this situation to change.

The fee for self-employed companies

In case of being a self-employed company, you must pay a higher fee than the regular ones, the minimum contribution base being € 1,199.08 and the fee of € 357 per month . This type of quota also affects the self-employed who have 10 or more workers in their charge.

The self-employed fee, as it is not tied to VAT, cannot be deducted as an expense from the business budget, although it can be done through personal income tax with the annual income statement without the need to show any invoice .

Self-employed workers who are not registered in the Special Regime for Self-Employed Social Security Workers or who are, but who fail to comply with the payment quotas from the beginning of their economic activity, may incur serious penalties against the Treasury.

Steps to register as a freelancer

If you are in the process of becoming a self-employed person, you need to comply with certain administrative procedures to start your own business legally. Here are the most important requirements:

  1. Register as self-employed in the Treasury . In this institution you present form 036 or form 037 to apply to the Census of Employers, Professionals and Retainers. In these documents you detail your personal data with your tax address and the taxes you must pay. Model 036 is only for professionals in special VAT regimes, while model 037 is for the self-employed. When you register with the Tax Office of your municipality, you also do so by omission in the Economic Activities Tax register. However, you will have to invoice more than € 1,000,000 to pay this tax.
  2. Register as a self-employed person in Social Security . After registering with the Treasury, you have 30 days to enter the TA0521 form in one of the offices of the public body. The application must be accompanied by your ID or passport, Social Security Card, worker's permit for foreigners, copy or original of the registration in the Treasury. In this process you must establish what is your contribution base and the coverage.
  3. Register with the City Council for the opening license . In case you are going to open a place to start your economic activity, you have to apply for the building permit at the Town Hall. The cost will depend on the size of the premises, the commercial relevance of the location and the type of activity.
  4. Request registration in labor organizations . As you have a staff of workers in your charge, you must notify the body of your Autonomous Community that you have opened a work center. You must also register with Social Security. Even if you do not have workers under your responsibility, it is mandatory to have a Guest Book that Labor and Social Security inspectors use in their inspections. You can also use a ibro l e Visits for greater control and comfort.

Advantages and disadvantages of working as a freelancer

Thanks to the development and sustained growth of e-commerce, it is increasingly common for people of all ages to decide to become self-employed in order to have greater financial independence, as well as greater flexibility in their schedules and in their lifestyle.

However, like everything else, each type of work has its pros and cons depending on your personality and your work flow. Among the benefits of being self-employed, the following stand out:

  • There is greater control and independence in the decisions to manage your company.
  • You avoid the previous processes of Constitution.
  • It is the cheapest and fastest way to register a business .
  • Considerable reduction of legal procedures, which lowers costs .
  • Autonomy in planning and organizing the time you want to use to start your own business.

Among the disadvantages of being a self-employed entrepreneur are.

  • In case of obtaining high profits and profits, the taxes are higher than those you pay in a partnership.
  • You cannot hire relatives up to the second degree of consanguinity.
  • There is no difference between personal and business assets. What puts your own assets at risk in the face of mortgages or debts. This also means that if you are married, at some point your spouse can claim some benefit from your business.
  • In front of the public opinion, the self-employed are still not recognized in the same way as the professionals who work in a company.

Aspects to consider before deciding to be self-employed

You must first consider what the initial costs are to start your own business, since it is part of the money you are going to invest. In addition to informing you about the administrative and fiscal procedures, as well as what are the legal requirements that banks and lenders ask for.

There is also the possibility of obtaining grants through private loan plans and through the new crowdfunding systems on the Internet or loans between individuals , taking advantage of the potential of social networks.

Types of freelancers

On a global scale, the number of people who are self-employed is growing every day. In Spain, more than 3.2 million self-employed people have registered in the Special Regime for Self-Employed Workers , which is a fairly heterogeneous group and differentiated in their economic and professional specializations. If you are in one of these areas, see if you should receive the benefits of the flat rate according to your working conditions.

Here is the most used typology in the current labor market:

  1. Self-employed and freelance professionals: They include those professionals who are registered and carry out their functions with a sole proprietorship. In this group are lawyers, economists, architects and psychologists. Generally, they are listed directly in the mutuals of their professional associations, and those professionals who are not registered and who are usually those entrepreneurs in the new areas of digital marketing such as designers, programmers, writers and translators.
  2. Self-employed workers : They manage a small business of their own that is in their name under the figure of self-employment. In some cases they have employees under their responsibility. These self-employed are listed for business activities in the economic activities tax , through modules for personal income tax. In this group are located hairdressers, masseurs, builders and taxi drivers. As well as athletes and artists who work for entertainment purposes, such as theater, music, television and bullfighting or sports activities.
  3. Corporate entrepreneurs : They are those who have the majority in a company and are in charge of the administration of that business. They generally deal with exclusive managerial tasks. This figure is usually sought to reduce taxes and limit your liability in relation to the assets of the company.
  4. Agricultural self-employed : Those individuals who work in agricultural activities are considered. Since 2008 they have been listed under the special regime called the Special System for Self-Employed Agrarian Workers.
  5. Economically dependent self-employed workers : These are those professionals who bill only a single client, which corresponds to 75% or more of their income. They cannot have employees under their charge.
  6. Self-employed collaborators : They are the relatives of the self-employed up to the second degree of consanguinity who help in the business constantly.
  7. Worker members of associated work cooperatives : They must contribute this type of special regime.
  8. Community members or partners of communities with irregular assets .

If in your case you want to start and build your own business, it is important that you get timely advice before investing or risking significant capital.

Being informed is one of the keys to having stable businesses today. Consider that this independence process requires time and sustained effort .

Be brave with cunning to be autonomous and not shipwreck in the attempt. This step you are about to take is an opportunity to be your own boss, spend more time with your family, and have greater satisfaction from leaving your own legacy to the world.

[REFERENCES]

  • Social Security Bonuses / Reductions - SEPE

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