Self-employed must allocate half their monthly income to taxes and contributions

The General Council of Economists (CGE) has published its latest report on the tax bill of Spanish households. Taking into account the average income declared by the self-employed, the cost of taxes and social contributions is, on average, between 45% and 60% of their turnover.

A self-employed person with a gross income of 3,100 euro per month must allocate between 45% and 60% on average to the Treasury and Social Security for taxes and social contributions. This is extracted from the latest data published by the General Council of Economists (CGE) and the returns declared to the Tax Agency by the self-employed last year.

Although it is true that, in many cases, the INCOME declaration may be refundable depending on your family circumstances and that the self-employed contributions are deductible in Personal Income Tax, these are amounts that the self-employed must deliver to the Treasury from their income during year.

Specifically, economists point out that the tax bill of a household made up of a couple and a child with an income of 37,000 euro – the average income declared by the self-employed – amounts to 31.27% of them. In the case of RETA members, it is also worth remembering that they themselves must pay Social Security their own social contributions which, for this level of income, are between 368.23 and 998.47 euro per month.

In the event that they contributed for the minimum base of their section – the most common -, they would pay a fee of 368.23 euro per month. In this case, adding taxes and contributions, it could be concluded that these self-employed workers are paying, on average, 43.14% of their income to the Treasury and Social Security each month. That is, they would have around 24,900 euro net.

This bill is even higher if they decide to contribute for the maximum base of their net income bracket. Adding both concepts – taxes and Social Security contributions – the self-employed who are contributing at the maximum base of this section would be paying around 63% of their income to the Administration each month. Or, what is the same, billing 37,200 euro per year, and if they had a child, they would barely have 13,764 euro available to spend.

How much do self-employed workers with high and low incomes pay?

The proportion is similar in the case of self-employed workers who contribute in the highest income bracket. Thus, using the example of a self-employed worker who declares 6,001 euro of monthly income, your tax and Social Security bill would be the following:

If you contribute for the minimum base of the section – a fee of 542.12 euro per month -, you would pay, between taxes and social contributions, 43.32% of your income to the Administration.

If you contribute for the maximum base of the section, 1,477.51 euro, you would pay 58.91% of your gross monthly income to the Treasury and Social Security.

On the contrary, the General Council of Economists (CGE) establishes 28,000 euro per year as a lower-middle income threshold. The self-employed with this billing would be paying each month, in taxes and contributions, the following proportions:

If you contribute for the minimum base of this income bracket, 38.31% of your turnover.

If you contribute for the maximum base of the section, 55.34% of your gross returns.

The tax bill of Spanish households exceeds 30% of their income

Data from the General Council of Economists showed how Spanish households made up of a couple and a child are paying to the Treasury, on average, more than 30% of their income. A figure that, added to the social contributions that the self-employed have to pay to Social Security, allows us to conclude that self-employed workers are paying more than half of what they earn to the State.

Based on these figures, the president of the CGE, Valentín Pich, assessed that “situations like this should make us think about how important it is to efficiently manage public resources given the enormous impact that tax burdens can have on many families.”