Self-Employed: From This Year, the Choice of Contribution Bases Expanded from Six to Thirteen

Craftsmen, farmers, freelancers, and other self-employed individuals are divided into two groups based on the method of determining the contribution obligation for social security – those for whom it is the only or main occupation who are registered in the registry of pension and health insurance contributors based on the performance of self-employment and individuals who perform self-employment in crafts, freelancing, or agriculture alongside employment or retirement, if permitted by special regulations, for whom this activity is considered a secondary activity for contribution purposes.

Insured as Self-Employed

The types and rates of mandatory contributions paid for their compulsory insurance by craftsmen, freelancers, and farmers are the same for all individuals registered in the registry of contributors based on this basis. They pay a pension insurance contribution at a rate of 20 percent and a health insurance contribution at a rate of 16.5 percent. Monthly bases for paying mandatory contributions vary and depend on the basis on which the contributor’s status was acquired. They cannot use exemptions from the contribution obligation prescribed for employed workers.

Monthly bases for each year are determined by a decree issued by the Minister of Finance and are calculated as a multiple of the prescribed factor and the average monthly gross salary earned in the first eight months of the previous year. According to this rule, all monthly bases for 2024 are determined based on the average salary in 2023, which amounted to 1,560 euros. For lump-sum craftsmen, a factor of 0.4 is applied, for craftsmen who determine income based on the Income and Expense Book, a factor of 0.65, for profit tax liable craftsmen and freelancers, a factor of 1.1. These are the minimum monthly bases.

What’s New

Every self-employed person can choose to pay contributions on a higher base. From January 1, 2024, the possibility of choosing a factor for determining a higher base has been expanded from six to thirteen monthly bases that the contributor can choose. Now self-employed individuals can choose a base higher than the one prescribed for them, determined by the product of the average salary and factors of 0.5, 0.75, 1.0, 1.5, 2.0, 2.5, 3.0, 3.5, 4.0, 4.5, 5.0, 5.5, or 6.0. This novelty was introduced to encourage self-employed contributors to choose a higher base, which would result in higher contributions to the pension and health system.

If a craftsman, freelancer, or farmer whose contribution obligation is determined and paid in monthly amounts uses the right to salary compensation at the expense of the compulsory health insurance system (sick leave after 42 calendar days, maternity and parental leave, etc.), their contribution obligation is suspended during that period. When the contribution obligation is suspended for part of the month, the base for that month is proportionally reduced, and when the obligation is suspended for the entire month spent in insurance, contributions are not paid for that month. A person who uses the right to work half-time according to special regulations has their contribution obligation suspended by half the amount, so the monthly base is reduced by half the prescribed amount.

If It’s a Secondary Activity

Individuals who perform crafts, agriculture, or freelancing alongside employment do not pay contributions for these activities every month. For them, performing self-employment is considered a secondary activity, and the contribution obligation is determined once a year based on the prescribed annual base. If they are liable for income tax from self-employment and determine income based on received payments and paid expenses, the contribution obligation is determined based on the total annual income earned, without exemptions and reductions prescribed in the income tax system, but up to the amount of the prescribed annual base for them.

If they are liable for income tax at a lump-sum amount, the contribution obligation for the secondary activity is determined by the Tax Administration by issuing a decision, based on the lump-sum income stated in the PO-SD form submitted by January 15 of the current year for the previous year, and contributions must be paid after receiving the decision. For profit tax liable individuals, the contribution obligation is determined based on the amount of profit earned, but up to the annual base for the secondary activity, and payment for the previous year is due by the end of April. The highest annual base for paying contributions for these individuals for 2024 amounts to 12,168 euros. They pay contributions at reduced rates: for pension insurance at a rate of 10 percent and for health insurance at a rate of 7.5 percent. If they incur a loss from the secondary activity, they have no contribution obligation.