RETA reform: Changes in the tax rates for self-employed

The Ministry of Inclusion, Social Security and Migration presented the approval of the RETA Reform for the next 3 years: a roll-out of the real income-based contribution system with 15 brackets and a new flat rate. Find out what it is all about!
woman calculating the new tax rates for self-employed

Tabla de Contenido

The RETA Reform (Special Regime for Self-Employed Workers) was proposed in Congress based on two fundamental points: a reduction in the tax rates for self-employed workers earning less than 1,300 euros per month and an increase in the rates for those earning more than 1,700 euros per month.

According to the Minister of Inclusion, Social Security and Migration, José Luis Escrivá, it is a plan that “emerges from the consensus among all the organizations” and would allow the self-employed to “adapt their contributions and be entitled to higher benefits“.

The RETA Reform has contribution tables with 15 net return brackets for the next 3 years (2023, 2024, and 2025), in which the lowest rates are decreasing and the highest ones are progressively increasing. But how will they work? Read on!

Tax rates for self-employed in Monthly net return brackets

2023

As the following tables show, the self-employed worker will have to pay a fixed monthly rate depending on their monthly net income.

In other words, in the case of 2023 with the RETA Reform, if the person earns an amount equal to or less than 670 euros, they will have to pay 230 euros per month as a contribution, which corresponds to bracket #1; while if they earn more than 6,000 euros per month, their contribution corresponds to 500 euros.

reta reform rates for 2023

2024

For 2024 the same procedure will continue: those who earn more will pay 530 euros per month and those who earn less (equal to or less than 670) will pay 225 euros. Unlike 2023, this rate will be reduced by 5 euros for those with lower incomes and will increase by 30 euros for those with higher incomes.

As in 2023, for 2024 with the RETA Reform, there will also be reductions and increases in the annual rate: the largest reduction will be in the first bracket with up to 827 euros per year compared to the current rate; while those who earn the most will pay 2,833 euros per year compared to the current rate.

reta reform rates for 2024

2025

For this year, the fee for the lowest earners will drop to 200 euros and for the highest earners will raise to 590 euros per month.

Comparing the RETA Reform with the current plan, those positioned in the first bracket will have a deduction of up to 1,127 euros per year and 94 euros per month; while those positioned in the last bracket (those with the highest income) will pay 3,553 euros per year more than they currently pay, which means an increase of 206 euros per month.

reta reform rates for 2025

Impact of the RETA Reform

According to Social Security figures, there are 3.4 million self-employed workers in Spain, 50% of whom report incomes equal to or less than 670 euros per month, and with the RETA Reform, their contribution will be significantly reduced over the next 3 years.

Likewise, 14% more of these self-employed workers who have incomes between 670 and 1,125 euros per month, will also pay less.

While that 12% with earnings between 1,125 and 1,700 euros per month will pay the same or slightly less, and the remaining 24% with earnings of 1,700 euros or more will pay more, especially those whose income exceeds 4,050 euros per month (8% of the total).

Self-incorporated workers with a net return below the minimum interprofessional wage (SMI), family members, and those with zero income will pay a minimum contribution of 1,000 euros, which will be progressively converted to that of the general scheme.

A flexible system and calculation of the net return

At the beginning of the year at the time of registration, the interested self-employed worker will communicate their net income forecast, which every 2 months (up to 6 times a year) can be modified. At the end of the fiscal year and with the data provided by the Tax Agency, Social Security will regularize the rate if it has been paid below or above the net annual return obtained.

During the remainder of the year, self-employed workers who were contributing on a higher base than that determined by their net return in December 2022, will be allowed to remain on that base if they so wish, but the contribution limit for workers over 47 years of age will change as of 2023.

How will all of the above be calculated?

With the RETA Reform, the net return will be calculated by deducting from income all expenses incurred during the work activity and which are necessary to obtain income (computer, rent, telephone service, purchase of supplies, etc.).

On that amount of deducted expenses, a deduction for generic expenses of 7% of the net return(3% for self-incorporated workers) is additionally applied.

New flat rate

Currently, the new self-employed can enjoy the benefit of paying only 60 euros of Social Security contribution in their first year of activity, 147 euros from the 12th to the 18th month, and 206 euros from the 19th to the 24th month.

From 2023, a new flat rate of 80 euros per month is established for newly self-employed individuals who start their activity during the first year, extendable for another 12 months if the self-employed worker registers an income below the Minimum Interprofessional Salary.

Bonuses and reductions

There will be new rate reductions for working mothers with an extension from 12 to 24 months for the care of children under 12 years of age or dependent family members, for agricultural collaborating family members (40%), and for the care of a minor affected by cancer or serious illness (75%).

Also, there will be a 10% reduction in Personal Income Tax (IRPF) on company contributions to social welfare systems with this new RETA Reform.

Protection for partial cessation of activity

The current cessation of activity will continue to apply in cases where the business must be closed and the RETA must be canceled in order to receive a benefit of 70% of the regulatory base for a maximum of 2 years.

However, a new partial cessation of activity of 50% of the regulatory base will be added, compatible with the activity, and which can be collected for a period of 4 months to 2 years.

This will be accessible to:

  • The self-employed with hired employees who reduce or suspend the working day to 60% of the workforce, who see their income or sales cut by 75% for two quarters, and who do not have income above the SMI.
  • Self-employed without hired employees and with debts of non-public creditors for two quarters that involve a 75% reduction in the level of income or sales.

Also, a partial temporary cessation due to force majeure is established when there is a declaration of emergency and the self-employed worker loses 75% of their income and is left with an income no higher than the SMI.

Adapting the RED mechanism to the self-employed

According to Agencia EFE and Vanguardia, the RETA Reform adapts the Red protection mechanism established in the labor reform for cyclical or sectorial Temporary Employment Regulation Files (ERTE), in both cases having to prove a drop in the income or an impact on the workforce.

In the cyclical modality, they will receive 50% of the regulatory base for up to one year, without consuming the right to benefits for termination of the activity and with a 50% exemption of the contribution, while in the sectorial modality, they will receive a single payment of 70% of the regulatory base and 50% of the contribution.

Do you want to know more about it?

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