Self-employed flat rate: all you need to know

Starting a career as a freelancer means taking on a whole new set of challenges. You’ll face plenty of obstacles along the way, including a wide range of different expenses that will start piling up. Fortunately, there are measures in place to help support entrepreneurs and make their first steps into the world of self-employment a little easier. Read on to find out more about the flat rate for self-employed workers, who can benefit from it, and how to apply for it.

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The self-employed flat rate is a monthly contribution of €60 that independent workers pay into the social security system. You can take advantage of the self-employed flat rate for the first 12 months after starting your business, and in some cases you can extend it for two to three years. This reduced rate replaces the standard freelancer quota rate, also known as the "self-employed quota,” which amounts to €283.30 per month. 

The self-employed flat rate was implemented as a way to encourage self-employment and support entrepreneurship. Although initially aimed at people under 30, it was later amended so that all newly self-employed individuals could benefit, regardless of their age. In 2019, the rate went up from €50 to €60, and the first tranche of this subsidy was extended to one year for newly self-employed workers.

Although the application requirements  for the self-employed flat rate were stricter back when it was introduced in 2013, they’ve become more flexible in recent years. Today, applicants have to fulfill the following guidelines:

• It must be the first time you register as a self-employed worker, or if you have been self-employed before, it can’t have been in the past 2 years.
• If you’ve previously been registered as self-employed and paid this reduced rate, it must have been at least 3 years since your last flat rate payment.
• Mothers who return to work after a period of maternity leave can pay the flat rate without having to wait the usual 2 to 3 years.
• You can't be a family member who is also working as an assistant to a self-employed worker (autónomo colaborador).
• You can’t have any outstanding social security payments or tax debts. 
• Certain self-employed workers with more than one job are not eligible for the flat rate. This means that if you are self-employed at the same time as being employed at another company, you'll have to choose only one subsidy. If you already benefit from the rate for workers who contribute to both social security regimes, you won't be able to take advantage of the flat rate for self-employed workers. Although you can’t combine both rates at the same time, you can choose one of the two, and it's often more cost-effective to choose the self-employed flat rate.

Newly self-employed individuals living in places with fewer than 5,000 inhabitants are eligible to extend their flat rate period for up to 24 months. You’ll be able to qualify for this extension if you meet the following requirements:

• You must be registered on the census of a municipality with fewer than 5,000 inhabitants at the time you enroll as a self-employed worker in the social security system. In addition, you’ll have to continue to be registered on the census in the same municipality for the next 4 years.
•  You have to register with the corresponding tax office (Agencia Tributaria), specifying the address where you are going to carry out the business activity, which must be within the municipality you have chosen.
• You will need to be registered under the RETA system (Régimen Especial de Trabajadores Autónomos) for two years after first signing up as a self-employed worker. 

If you have questions about your situation specifically, you can always contact the social security office closest to your home to receive more personalized advice.

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If you meet the requirements mentioned above, it's time to formalize your status with the tax and social security authorities to start working as a freelancer. Here we explain step by step how to apply for the flat rate for self-employed workers:

• Visit your local tax office with a prior appointment. There, you'll need to complete form 036 or 037, whichever is the most appropriate for your specific case.
• Next, you will have to sign up for the Tax on Economic Activities (IAE), by completing form 840.

Within 30 days of registering with the tax agency, you need to go to your local social security office to sign up for the Special Regime for Self-Employed Workers (RETA) via form TA0521. 

Once your appointment is booked, be sure to bring these documents with you:

• National/Foreign Identification Number (DNI/NIF)
• IAE registration form
• Form 036 or 037 (whichever one the tax agency gave you)

To find out how to calculate the flat rate for self-employed workers, you first have to consider the contribution base. The contribution base is the monthly income estimate on which self-employed workers base their social security contributions. Unlike salaried employees, self-employed workers are free to choose the amount payable each month, which is not related to the income from their business earnings. 

What you pay into to social security each month (i.e., the self-employed quota) depends on the contribution base you choose. The government decrees the minimum and maximum contribution bases every year, and these thresholds are recorded in the general state budget. If you are unsure of each year's thresholds, you can always check in the state budget. 

These are the contribution thresholds for 2021:

• The minimum self-employed contribution base is €944.40 per month.
• The maximum base is €4,070.10 per month.

The contribution base you choose will determine the social benefits you will receive (e.g., unemployment, temporary disability, and retirement benefits). The more you pay, the better entitlements you receive. 

If you only want to pay the self-employed flat rate, you should choose the minimum contribution base. You'll pay €60 per month for the first year, as mentioned above. If you choose a higher contribution base, an 80% rebate will be applied in the first year. This works out to about €300 per month.

Once the first year has passed, you’ll be entitled to the following rebates, regardless of the contribution base you chose:

Don't worry too much when making your choice as you can adjust the base up to four times per year once you’ve officially registered as self-employed. However, make sure you choose the minimum base if you want to qualify for the €60 flat rate.

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At N26, we think self-employed people deserve all the support they can get. We are the first neobank becoming a collaborating entity with the Social Security system in Spain! This means you can collect your benefits in your N26 account and also pay your freelancer tax and make other payments to the administration through us.

Also we created our N26 Business accounts, designed specifically for freelancers. Just starting to get your business off the ground? Sign up for the free N26 Business Standard account. No sign up fee, no fixed recurring costs. Plus, you’ll get 0.1% cashback on every purchase you make using your N26 Mastercard. Upgrade at any time to one of our premium accounts for even more cashback, plus benefits like Spaces sub-accounts and a wide range of insurance. Visit our compare page to find the plan that’s right for you. 

Not sure how to pay your freelance taxes from your N26 account? Check out this article to find out how you can get ahead this tax season.