We are now into the fourth month of the year and the changes keep coming! This time it has to do with the monthly contributions, sole-traders must make to Social Security but as was the case last year, the contribution was not altered in January, instead it was left until July and it looks as though the same is going to happen this July as well. The General State Budget for 2018 was approved on the 27th March of this year and in it a 1,4% increase on these monthly contributions was approved which equates to approximately 3,88 euros. I can imagine that some will breathe a sigh of relief because last year, the increase was almost double but at the end of the day, it is still less money in our pockets at the end of the month.
The bad news is that the expected Reform that would allow sole-traders to contribute in accordance to their income has been postponed yet again. This means that until such a time and if that time ever comes to pass, the minimum Base Rate will go from 919,80 euros to 932,78 euros meaning that the minimum contribution will increase from 275,02 euros to 278,90 euros. This measure affects approximately 80% of all sole-traders in Spain who contribute on the minimum Base Rate.
What about those who contribute on a higher bracket? Well, this bracket will also undergo an increase but in their case, the impact is much higher as they will pay 1.137,32 euros instead of the current contribution of 1.121,63 euros. This is an extra 15,69 euros per month towards their Social Security at the maximum Base Rate.
The only business owners who have caught a well-deserved break for once are those who are directly linked to a company such as limited liability or public limited companies as their contributions will not increase, or at least for the remainder of this year.
This is another although not an unexpected blow to this particular community that has a tough enough job as it is in today’s economic climate. The General State Budget tends to increase each year, but the question is how sustainable it will be within the next few years if this trend continues at its current rate of increase. Even though certain improvements have been made in recent years where new sole-traders can begin their businesses by contributing on a more flexible rate, there is definitely room for more improvement.
Other European countries contribute in line with their income, yet Spain still refuses to get on board with this system, so I cannot help but think it is down to the corruption that starts at the top with politicians and filters all the way down the chain, meaning that business owners cannot be trusted to declare their actual income and would use this type of system to undeclare to avoid paying the correct amount in. Imagine what would happen if all of a sudden Social Security collected 25% less than it does now! The system would completely collapse so modifying the system would certainly suppose a risk.
The only ray of sunshine at this time of the year (and not even for everyone) is the fact that the declaration period for Personal Income Tax Returns opened on the 4th April so for those of you who are due a rebate, this can be taken as a mini consolation prize.