Since the entry into force of the Law on Urgent Reforms for Self-employed Individuals, the Social Security has continuously refused access to so-called “corporate self-employed individuals” to a “flat rate”. Three years after the publication of the Law, it now includes them in the scope of application of the benefit, accepting the interpretation of the regulation by the Supreme Court in several cases.
The entry into force of Law 6/2017, of October 24, 2017 on Urgent Reforms for Self-Employed Individuals brought with it important changes in the acknowledgement of new rights to self-employed individuals, some of which were analyzed in our previous blog Self-employed individuals and retirement pensions: the insecurity grows.
One of the most attractive benefits provided for in the Law was access to the so-called “flat rate”, which consists in major benefits during the initial months of contribution for self-employed individuals that register with the Special Self-Employed Worker Regime and those that have not been registered in the last two years. Self-employed individuals in such situations benefit from a reduced contribution quota during the first 24 months after registering with the Social Security (60 euros per month or an 80% reduction during the first 12 months, depending on the individual circumstances, as well as other reductions and discounts ranging from 30% to 50% of the quota in months 12 to 24).
With the entry into force of the Law, many of the so-called “corporate self-employed individuals” (those included in the self-employed regime due to their relationship with a company) attempted to obtain such benefits, which were always refused by the Social Security on the grounds that the benefits were only applicable to self-employed individuals that perform their own activity on a personal basis (but not those working through a company).
In light of the criterion held by the Social Security, many of the individuals affected decided to challenge the impossibility of obtaining such benefits, firstly via administrative proceedings and secondly in court. As a result, the Supreme Court issued judgments on December 3, 2019 (judgment no. 1669/2019), February 7, 2020 (judgment no. 286/2020) and March 4, 2020 (judgment no. 315/2020) in which it acknowledges the right of corporate self-employed individuals to the benefits of the so-called “flat rate”, to the same extent as those that carry out an activity on a personal basis. Specifically, in its judgments, the Supreme Court considers that the wording of the Law does not infer (as interpreted by the Social Security until such time) that the benefit is only applicable to self-employed individuals that carry out an activity on a personal basis and not to those that do so through a company. Furthermore, the Supreme Court considers that the purpose of the Law (to encourage an entrepreneur culture and association to promote self-employment through a reduction in Social Security costs at the beginning of the activity) is also achieved when an entrepreneur decides to perform an activity through a company, given that the application of this regime does not benefit the company as such, but rather the person behind it and, in short, is the person commencing a new business activity.
As a result of this Supreme Court case law, the Social Security issued an official communication in mid-2020, accepting the doctrine established by the Supreme Court and acknowledging that corporate self-employed individuals are also entitled to a flat rate, under the same conditions as those that perform their activity on a personal basis. Specifically, the communication stated that the criteria held until then had to be changed to enable corporate self-employed individuals to obtain the contribution benefits established in the Law, upholding the appeals and proceedings in course at the time. However, it also stated that in proceedings that had concluded or had not commenced, the granting of these benefits would only be reviewed if expressly requested by the person concerned.
In short, this change in criteria and the doctrine established by Supreme Court case law opens the door to a possible review of the situation relating to corporate self-employed individuals that registered with the special regime after the entry into force of the Law on Urgent Reforms for Self-employed Individuals that could not apply for the benefit or were refused it by the Social Security.
Garrigues Employment & Labor Law Department