In 2023, the flat rate will disappear and the reduced self-employed quota will come into force .
What is more interesting: to become self-employed before the end of 2022? or to do it better in 2023?
Well, I hate to say it…but, it depends.
Whether you are thinking of registering your activity before the end of 2022, or if your intention is to do so from 2023, this post is of interest to you! I will explain the differences, especially economic, and what are the implications of this new regulation.
Be on the lookout, as these differences can mean savings… or, on the contrary, higher costs.
The Social Security contribution rebate, also known as Flat Rate, will disappear at the end of 2022, and the self-employed who have applied for it before December 31, 2022, will not be able to benefit from the Reduced Rate (reduced self-employed quota), which is economically more profitable for those entrepreneurs whose net income does not exceed the SMI.
There is no Waiver option. However, the conditions will be respected and will continue to be subject to it.
From 2023, for new entrepreneurs (or those who resume an activity), will enter into force the reduced self-employed quota, which is a new bonus and consists of paying € 80 fixed for two years, provided that during the second year, the income of the self-employed does not exceed the current SMI ( currently at € 1000/month with 14 annual payments). If this is the case (exceeding the SMI in the second year), you will have to pay the corresponding contribution according to your actual income during this second year.
The 80€ fee is applicable without this requirement for the first year only !
Looking at it with numbers, the Reduced Rate ( 80 fixed for 24 months: Total 1.920€) is more economical compared to the current Flat Rate, which is progressive (69€ for 12 months, 147€ for 6 months and 205,8€ for 6 months: Total 2.944,8€) for those whose net income during the second year of activity does not exceed the SMI.
The difference is approx. 1.025€.
If during the second year the SMI is exceeded, the situation is just the opposite, the amount would even be exceeded. There would be no savings whatsoever in terms of the cost of the Social Security contribution during the second year, and during the first year it would even be a little more expensive (€132). That is to say, approximately €1,157 would be lost as a bonus, increasing the expense by the same amount.
TWO VERY IMPORTANT ASPECTS:
- 0€ quota for self-employed workers in Madrid, Andalusia and Murcia
These three communities have announced that they will subsidize the totality of the Social Security contributions of their new self-employed as from 2023 (upon request and fulfilling certain requirements) during the first 24 months. For the second year, the subsidy of €0 fee is maintained, if the Reduced Rate is still in force. That is, it is subject to the same condition that the Net Income does not exceed the SMI.
- Men under 30 and women under 35.
With the Flat Rate that remains in force until December 31, this group enjoys a 30% bonus without any conditions regarding their Net Income during their 3rd year of entrepreneurship. At this point in time, there is no news that this bonus will be maintained as it is. With the Flat Rate you have the certainty that you will pay during:
12 months: 69€.
6 months: 147€.
18 months: 206€.
To help you get out of this mess and make a decision, here are the following questions:
Will you be able to cover your needs with only 1.166€/month?
Are you willing to take the risk and let yourself be conditioned for the next few years?
Will you limit your business growth just to fit the SMI metric?
If your forecasts and expectations as self-employed for the second year of activity (2024), do not exceed €1,166/month of net income, the reduced self-employment fee is in your favor. Otherwise, it is in your interest to register before the end of 2022 (remember that with this management we can help you at a cost of 0€).
At this point, I insist on the importance of doing a good financial planning and follow up. If you need help with this task or with your discharge, I remind you that you can request a Consultancy and work hand in hand with me on this part. Request it HERE
The new contribution system based on real income creates a communication bridge between the Social Security and the Tax Agency. The regulations provide for reviews by the competent bodies, so that, if the case arises of having benefited from the Reduced Rate and subsequently, your economic results indicate that you did not meet the requirements for it, that money would be claimed back and would have to be returned.
Such an unpleasant situation can be avoided by managing your finances.
If you are thinking of registering in the next few months, invest time and/or money and make your economic forecasts for the medium-long term.
And finally, I also insist on the importance of creating profitable and sustainable businesses, as well as having those personal economic needs covered. Needs that for each person are different and increasingly more so.
Thanks for reading and I hope this post has been helpful!
