Self Employed – some good news


A new Royal Decree was approved and published on 26 January 2021 whereby, amongst other measures, the social security compensations to self-employed business traders were extended until 31 May 2021.   The new conditions to apply are as follows:

Type 1.  Compensation for close of business due to COVID-19.

This is applicable to those self employed who, from 1 February 2021, were forced to close or suspend their business activity as a consequence of further regulations being implemented by local, state or national Government. The conditions are as follows:

  1. Registered as self employed before 1 January 2021.
  2. It requires that registration with the social security office remains in place until 31 May 2021.
  3. All social security payments must be up to date. If not, there is a period of 30 natural days during which payments can be brought up to date.
  4. The application for compensation must be made within the first 21 days from the date of publication of this Royal Decree or the regulations that forced the closure of the business.  If filed late, any compensation will only apply from the date of application.

The amount of compensation will be 50% of the social security on which monthly payments are calcuated, e.g. for a person who pays 270 € per month social security contributions, the social security base is, say, 1.000 €.   Therefore this person would receive approximately 500 €.

During this extension period, monthly social security payments are suspended, so taking account of the example above, there will be an additional saving of 270 € a month.

Type 2.  Compensation for self employed with no income or very reduced income and not receiving any other economic compensation.

For those who are self employed but were not affected by the forced closure of their business yet have suffered a substantial reduction of their income AND cannot benefit from any other economic compensation, they can apply for this Type 2 compensation.

The conditions are as follows:

  1. Registration as self employed prior to 1 April 2020.
  2. Continuing registration with the social security office.
  3. Fully up to date with all monthly social security payments.   If not, as above, a period of 30, natural, days will be given for the payments to be brought up to date.
  4. Cannot benefit from any other social security compensation.
  5. Income in the first semester of 2021 cannot exceed 6,650€. Also, for the same period, a declaration that this first semester’s income will be less than that declared in the first quarter of 2020..
  6. The application must be made within the first 21 days of February 2021, and will last for 4 months, i.e. 31 May 2021.  If filed late, as with the above, the compensation will not be lost but will apply from the date the application is made.
  7. This compensation is not available to employees, except where the employment income does not exceed 1.385,41 € per month.

The amount of the compensation will be 50% of the social security basis for calculation, the same as mentioned above for Type 1.

Again, as with Type 1, the self employed person will not have to pay their monthly social security payments during this time.

Finally, the social security authorities will review all applications made and provisionally approved, from 1 September 2021. If one’s income has increased from the same period 2020, all compensation will have to be repaid together with suspended social security payments, with one hand they give, with the other……

.Anyway, what are the odds for anyone recieving any compensation payments before September, cynical, maybe but we have clients who are still waiting for their rent grants, almost a year now nothing received……

Type 3.  Extension of the existing compensation that was approved at the end of June 2020 and then in September 2020.

There is another compensation available from 1 February 2021, for those self employed who can prove that their business income in the first semester 2021 will be 50% less (it was 75% before)  than the business income declared in the 2nd quarter 2019, AND have declared net business income not exceeding 7.980 € in this semester.

The conditions are as follows:

  1. The application must be made within the first 21 days of February 2021.  If this is filed late, as above, this will not be lost but will apply from the date of application.  
  2. This will last until 31 May 2021.
  3. A slight change here, this Type 3 compensation requires that social security monthly payments are kept up.

The payments under 3. above, will be refunded together with the compensation.

Please contact Alicia Jimenez Ruiz, Commercial Department Manager, Spence Clarke, for further clarification of the above.

Thank you for reading, stay safe and healthy.

Spence Clarke specialises in the provision of Spanish tax, accounts, law and labour services, mainly to foreigners with interests in Spain. Our cross-border knowledge helps clients adapt to the Spanish system with the minimum of doubt and disruption. If you have any questions about this article or any other matter contact us, with no obligation, to see how we can help you.