Thursday , November 26 2020

New Reducing Contributions to Professionals – Example



Contributions were reduced to around 250,000 self-employed workers predicting the government bill was expected to be submitted within a week at the DPR.

This is one of Alexis Tsipras's commitments to TIF. This will be submitted within a week in Parliament and the reduction in contributions will be effective from 1/1/2019.

It is estimated that the profits for professionals associated with this bill range from 200-4,690 euros per year.

The basic provisions for social security contributions for entrepreneurs will provide that the main insurance premiums decrease from 20% to 13.33% while maintaining the current minimum contribution to EUR 117.2 per month (20% of the minimum wage).

In 13.3%, contributions to young scientists with activities up to 5 years are set, while farmers will pay contributions in 2019 by 12%, in 2020 at 12.66%, by 2021 by 13% and by 2022 at 13, 3% .

It should be noted that since January 1, 2019, the basic change for the calculation of social security contributions, plus gross income – without a reduction in contributions already paid to net taxable income, up to 100% of the amount and not as much as 85% this year.

Example

As ESEE shows, under the current regime from 1 January 2019, to annual income (net income + insurance contributions) of EUR 7,032, the person responsible will pay the minimum annual contribution, which is EUR 1,895.4 (monthly minimum contribution of 157, 9 euro * 12). Of this amount and up to EUR 70,330 levies will be calculated proportionally (net profit + insurance contribution) * 26.95%, while the maximum annual contribution of EUR 18,953.9 will be charged from 70,331 euros.

With the terms promoted, starting 1/1/2019 up to and including annual income (net income + insurance contributions) of € 9,346, the debtor will pay a minimum annual contribution of € 1,895.4 (monthly minimum contribution of € 157,9). Of this amount up to € 93,462, its contribution is proportionally calculated (net profit + insurance contribution) of 20.28% (13.33% in favor of pension + 6.95% in favor of health), while 93,463 above the maximum annual contribution of € 18,953.9.

From the comparison above, according to the ESEE, from the new provisions, preferably they will be self-employed / self-employed with annual gross income (net profit + contribution) between 7,033 – 9,346 euros, under the scheme in force in 2019, a proportional 26.95% rate will be imposed on this income step, with the new 1/1/2019 scheme paying a minimum annual contribution of € 1,895.4 (or every month 157.9 euros) and not the overall rate only 20.28%.

With a new mixed income scheme (net income + contribution) of more than € 9,346 and up to € 71,000, the contribution of the average middle and high income contribution is between 22% and 24.3%.

Also, based on improved changes, for gross profits between 70,331 and 93,462 euros, proportional coefficient (20.28%), while a maximum annual contribution of 18,953.4 euros will be charged. For this scale range (€ 23,131), more will be paid for anyone who wins more.

Please note that the projected increase in the current minimum wage (€ 586.08 gross) from 1/1/2019 will adjust the increase in the minimum monthly insurance contribution for entrepreneurs / entrepreneurs. This development, of course depends on the final rate of increase, will lead to increased contributions for the majority of self-employed people who pay the lowest contributions today.

Lawyer and engineer

Lawyers and engineers are expected to get triple the benefits of reducing major, additional and lump sum contributions. This is because primary pension premiums are reduced to 13.3% from 20%, while additional premiums and lump sums are set at a fixed amount calculated at 7% and 4% of the minimum wage regardless of income, ie 41 euros for additional and 23, 44 for single use.

For example, an engineer or lawyer with 20,032 euros of income, for primary insurance must pay 230 euros a month from the beginning of 2019. Now, with the new system will pay 173 euros. For a one-time fee, from € 124 a month, you will be asked to pay € 64.5. The annual benefit of all savings is € 1.401 (-32.96%). Health retribution remained stable at 6.95%. For annual revenues of € 40,000, the annual allowance is € 3,775 while to earn € 60,000 it reaches € 10,734.


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