Social Security has published several examples to explain to the self-employed how to calculate their contribution for actual earnings. Both for freelancers in direct estimation and in modules.
Experts recommend looking at the contribution base, not the Treasury fee
There are only two weeks left for the self-employed to start quoting for real income. Social Security has published several examples in its official magazine so that self-employed workers know how to calculate their monthly contribution as of January 1. However, experts recommend that RETA affiliates pay close attention to the contribution base rather than their fee.
The Treasury has highlighted on its web portal several concepts that the self-employed must take into account to start quoting for real income. In addition to knowing what the net income from the activity is (income minus expenses), self-employed workers must bear in mind their monthly billing, the deductible expenses of their activity, the deduction for generic expenses and the result of calculating their fee for actual income.
To specify what these concepts are, Social Security takes as an example a freelance journalist in direct estimation whose monthly billing – that is, his average income – is 900 euros per month.
- Monthly billing: 900 euros.
Like any self-employed worker, this journalist can deduct certain expenses related to his activity. The costs that can be deducted on average per month are 185 euros.
Deductible expenses: 185 euros.
The difference between the income (900 euros) and the expenses that can be deducted (185 euros) from the exercise of their activity result in their net income. In the case of this journalist, it would be 715 euros per month.
Net income: 900 euros (monthly billing) – 185 euros (deductible expenses) = 715 euros per month.
To this result, the Treasury continued, the deduction for generic expenses should be applied. There are many expenses that a self-employed person cannot deduct from his activity before the Treasury but that do represent a cost. These impossible-to-justify expenses have been taken into account when creating the formula by which the Social Security contribution of the self-employed will be calculated.
In the case of this journalist, as he is a self-employed person in direct estimation, a 7% may be applied as a deduction for generic expenses as stipulated in the norm. If it were a self-employed company, said percentage would vary to 3%. Taking as a reference the net income of this self-employed person (715 euros per month) and applying the 7% deduction will give us 50.05 as a result. This result must be subtracted from the net income.
Deduction for generic expenses: 715 euros (Net returns) x 0.07 (7%) = 50.05.
Having obtained the net income of this journalist (715 euros) and subtracting the deduction for generic expenses (50.05); the result would give a figure between one of the 15 sections of the table presented by the Social Security. In this particular case, your monthly average would be 664.95 euros per month, so your contribution base would be in Tranche 1 of the Reduced Table.
Quoting for the minimum base, your fee would be 230 euros per month.
Monthly average / Real income: 715 euros (Net income) - 50.05 (generic expenses) = 664.95 euros per month.
To find out what the self-employed contribution base will be, you must look at the following table. As we can see, the example presented by Social Security would cover the first part of the table, called the Reduced Table, as it has a real income of 664.95 euros per month and is in Tranche 1: those that are less than or equal to 670 euros per month.
Table of real income of the self-employed
In the event that the result of this formula varies - either because the self-employed person increases or decreases his monthly income - the self-employed worker may adjust his contribution base every two months through the public area of Social Security known as ' Import@ss'. On this platform, they will fully manage everything related to the new listing system.
Example of contribution for real income for self-employed in objective estimate or modules
Social Security also presented in its official magazine an example of a self-employed person who owns a clothing store and who is in an objective estimate or modules; so you will have to take into account the amortization of your business to calculate your actual income fee.
In this example the monthly billing of this clothing store will be 4,150 euros per month
- Monthly billing: 4,150 euros.
Regarding your deductible expenses - as it is an autonomous in objective estimation - you can include the rent of the premises; the supply costs – in this case the clothes that you sell in your store -; the current expenses of the premises and the amortization expenses for the investments made to start the business.
Deductible expenses: 900 euros (rental cost of the premises) + 600 euros (supplies of the clothing that it sells) + 400 euros (current expenses of the premises) + 270 euros (amortization of investments) = 2,170 euros per month.
Therefore, taking the income less the expenses, this clothing store will obtain its net income.
Net income: 4,150 euros (Monthly billing) – 2,170 euros (deductible expenses) = 1,980 euros per month.
Once the net income has been calculated, we apply the deduction for general expenses. As it is an autonomous module system, its percentage value will be 7%.
Deduction for generic expenses: 1,980 (Net returns) x 0.07 (7%) = 138.60.
Having all the data in hand, the self-employed person in an objective estimate regime will be able to know their real income or monthly average to know their quota or contribution base, looking at the table previously presented. In this case, quoting for the minimum base (1,841.40 euros per month) will correspond to a fee of 310 euros per month.
Average Monthly/Actual Income: 1,980 (Net income) – 138.60 (generic expenses) = 1,841.40 euros per month.
It is recommended to pay attention to the contribution base, not to the Treasury fee
Social Security in its publications "talks about the quota instead of the contribution base."
The self-employed, depending on their performance, will go to the quotation table and will be able to choose between a minimum or maximum base range. Within this section, the amount for which you want to quote is chosen and, later, the fee to be paid is calculated.
The Treasury is presenting the quota before the contribution base. It is understood that this formula is for the self-employed to see that they are going to pay little, but they should not forget that if their contribution base is lower, their benefits will also be lower.
At Aseryde Asesores, we guide you in your process of calculating the fee to be paid based on actual income in 2023. Contact us and we will help you.