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Social insurance contributions (freelancers) around Europerope
Thread poster: Anton Baer

Anton Baer  Identity Verified
United Kingdom
Local time: 15:20
German to English
+ ...
May 16, 2011

Hello,
I am a Canadian working as a freelance translator in Slovakia ("živnostenský list") where the compulsory contributions to social insurance come to 33 percent of income before taxes, and that's a flat rate. (The first year of self-employment, however, is a grace period.) The income tax rate for what is left over is now 20 percent.

This all seems to me astonishingly high, but is it just the "fair cost" of a welfare state?

What are the comparable rates for freelancers in other European countries, and what exactly is compulsory? For example, unemployment insurance? Accident insurance?

For Austria the rates are evidently as follows:
(http://ec.europa.eu/eures/main.jsp?catId=8656&acro=living〈=en&parentId=7801&countryId=AT&living=):

1. Sickness insurance: Freelance workers, new self-employed (Act on Social Insurance for Businesses – Gewerbliches Sozialversicherungsgesetz (GSVG)): 7.65%
2. Accident insurance: Freelance workers: 1.4% [and yet it's also written that this insurance is paid only by employers.]
3. Unemployment insurance: Freelance workers: 6%
4. Pension insurance: Freelance workers: 22.8%, newly self-employed (GSVG): 16.25%

Summed up, it's about 38 percent, flat rate.

How are things elsewhere?


 

Alexandra Lindqvist
Local time: 17:20
English to Swedish
+ ...
Latvia May 16, 2011

In Latvia minimum soicial contributions are at the moment 31,52 percent of 200 lats of your profit and income taxes were around 26 percent last year (not sure of the rate for this year).

The percentage for social contributions that you mentioned seems very high to me which makes me wonder if there might be a similar system in place where you live. Because the fact that this rate only applies to 200 lats of your profit here is something that is hard to find in any written document. I actually asked my accountant about it because everyone including tax officers had told med different things.


 

wilp  Identity Verified
Germany
Local time: 16:20
Member (2011)
English to German
+ ...
Germany social insurance May 16, 2011

Hi Anton,

I can't give you the exact rates but that is easy to find on the internet, for example here: http://www.freie-berufe.de/Versicherungspflicht-fuer-Frei.316.0.html.
I know for sure though that sickness insurance and pension insurance is compulsory in Germany and that is very high. For sickness insurance there is a minimum of around 250 Euro/month depending on the insurance company.

As far as I know unemployment insurance is not compulsory here but it is strongly recommended by the social services to have a so-called "Berufsunfähigkeitsversicherung" and to continue contributing to the unemployment insurance.

In Germany, there exists also the "Künstlersozialkasse" which takes on members like artists, musicians but also publicists and translators and I they are a little bit cheaper than the governmental institutions.

Birgit


 

Sonia Hill
United Kingdom
Local time: 15:20
Italian to English
UK national insurance May 16, 2011

The rate is much lower here. I copied this from a government website:

If you're self-employed you pay Class 2 and Class 4 National Insurance contributions. The rates are:

•Class 2 National Insurance contributions are paid at a flat rate of £2.50 a week (approx. €2.90)
•Class 4 National Insurance contributions are paid as a percentage of your annual taxable profits - 9 per cent on profits between £7,225 and £42,475, and a further 2 per cent on profits over that amount.

National insurance covers healthcare with the National Health Service, a basic state pension (very low, so I have a private one too), maternity allowance, unemployment benefit, etc.

For income tax, we have a tax allowance of £7475, and then we pay 20% on taxable earnings up to £35,000, 40% on taxable earnings from 35,001 to £150,000 and 50% on anything above that.


[Edited at 2011-05-16 12:54 GMT]


 

Samuel Murray  Identity Verified
Netherlands
Local time: 16:20
Member (2006)
English to Afrikaans
+ ...
Netherlands May 16, 2011

Anton Baer wrote:
I am a Canadian working as a freelance translator in Slovakia ("živnostenský list") where the compulsory contributions to social insurance come to 33 percent of income before taxes, and that's a flat rate. ... This all seems to me astonishingly high, but is it just the "fair cost" of a welfare state?


I haven't lived in NL for very long, so any Dutchies here please correct me if I'm wrong. In the Netherlands, your social insurance contributions are deducted for the whole year when you pay your income tax. The amounts are as follows:

* AOW (old-age pension, pays out at 67): 17.9% of your annual income, up to a maximum of EUR 4907 per year.
* ANW (life insurance, pays EUR 700 to your partner or EUR 120 per child per month, when you die): 1.1%, maximum EUR 300 per year.
* AWBZ (some sort of gap insurance): if employed, then 6.5%, max EUR 1950 per year, or if self-employed, then 4.4%, max EUR 1320 per year.

In addition, you need medical insurance, which is arranged with a private company of your choice, and paid monthly. My own medical insurance costs EUR 130 per month, and that is basic care plus one or two extras (the cheapest plan would be EUR 115 and the most expensive plan would be about EUR 175).

So if your income is EUR 40000, then your AOW would be 12%, your ANW would be 0.75%, your AWBZ would be 3.3% and your medical aid would be 3.9%. So, less than 21% in total.


 

Kirsten Bodart  Identity Verified
United Kingdom
Local time: 16:20
Dutch to English
+ ...
Luxemburg May 16, 2011

Around 23% of gross income. Includes pension, child benefit (full), health insurance. So, 2000 a month is 500-odd EUR per month to pay.

Your income is taxed after everything that can be taken off has been taken off and will amount to 10% if over 15,000 EUR per year net. Children take 1000 off for each, a non-working partner 10,000. Below 15,000 net no tax. If you are non-resident (most people are) you get taxed only on the services you render within Luxemburg. If you are resident which requires a postal address, a desk where you cna connect computer and phone, you get taxed on your income earned all over the world. Oh, and if you earn below 38,000, they do not bother to send you a tax return either.

Easy to see how Luxemburg has so much success with companies...


 

Bilbo Baggins
Catalan to English
+ ...
Spain May 16, 2011

Social Security: Flat minimum rate of 255 euros a month (even if you earn nothing).
Tax: Proabably around 20% to 25% of your income after deductible costs.

I'm hoping other Spain residents will add to this basic info:-)


 

RobinB  Identity Verified
United States
Local time: 09:20
German to English
Correction: Germany May 16, 2011

There are no compulsory social security contributions for freelance translators in Germany.

As wilp points out, everybody (now) has to have health insurance in Germany, whether state or private. Freelance translators can choose a plan and provider to suit their requirements and their pocket. I (mid-50s) pay around EUR 500 a month for very comprehensive combined health and long-term care insurance, which I think offers good value for money. What's more, about 90% of the contributions are tax-deductible.

There is no compulsory pension insurance for freelance translators in Germany. If somebody has been paying state pension contributions for many decades, it's probably worth their while keeping up those contributions if they go freelance, although the state pension isn't exactly generous and they should still take out additional private pension insurance. I have purely private pension insurance (coupled with disability insurance) and a large part of the premiums are also tax-deductible. My own plan isn't exactly cheap, but the payout at the end is very attractive and the monthly pension in the event of disability would be about EUR 6k.

Coupled with other generous tax allowances and an overall pretty modest income tax regime (by European standards), it's fair to say that Germany is one of the best environments for freelance translators in Europe (it's also the largest market by far, of course, and a very buoyant one at that).


 

Sheila Wilson  Identity Verified
Spain
Local time: 15:20
Member (2007)
English
+ ...
How about contributions "for the common good"? May 16, 2011

Posts here seem to be concentrating on payments made by freelancers for their own good e.g. health insurance contributions to cover their own future health problems, pension contributions for their own pensions.

What about complusory contributions to state welfare benefits? The complulsory social charges in France are quite high and only part of it is for our own cover. For example, I pay towards family allowances even though my son is 25 and I won't be having any more children. As far as I remember, it was the same in the U.K.


 

RobinB  Identity Verified
United States
Local time: 09:20
German to English
Contributions for the common good? May 16, 2011

In most countries, that is what part of the direct and indirect tax revenue is used for, so everybody contributes whether or not they get (or are even entitled to) something from the social security system.

In countries like Germany and the UK at least (I don't know about France), the social security system is subsidised to a considerable extent by general tax revenue, as the ongoing contributions to these systems fall well short of actual social security expenditures. In economic terms, these are known as "transfer payments".


 

Williamson  Identity Verified
United Kingdom
Local time: 15:20
Flemish to English
+ ...
Cyprus May 17, 2011

Curious to find out how much those contributions are in Cyprus? Lowest taxes in the entire E.U.
In Luxemburg, I would prefer to be an employee with a C.D.I. Highest income in the entire E.U.

[Edited at 2011-05-17 09:43 GMT]


 

wilp  Identity Verified
Germany
Local time: 16:20
Member (2011)
English to German
+ ...
Germany pension insurance May 18, 2011

Hi Robin,

this is very interesting to learn. I went to the social security authority here in Germany and they told me something else, but the reason could be that I also work as a language teacher and I think teachers have to pay into the pension funds.

Nevertheless, I find 500 Euro for a health insurance plan still quite expensive. But I just have tried to get a foot into the door of the business.

Thank you.

Birgit

RobinB wrote:

There are no compulsory social security contributions for freelance translators in Germany.

As wilp points out, everybody (now) has to have health insurance in Germany, whether state or private.

There is no compulsory pension insurance for freelance translators in Germany.


 

Anton Baer  Identity Verified
United Kingdom
Local time: 15:20
German to English
+ ...
TOPIC STARTER
Slovakia correction and Austria question Jun 17, 2011

Thank you all for those insights and detailed breakdowns.

An accountant yesterday clarified a few things that the people at the social security office had not. (I think they like to see people stagger away from the wicket.)

First, the 33% (overall) is levied on your taxable income, not income before taxation. Big difference. In Slovakia you deduct 40% of your income off the top as ‘expenses’ without having to itemise them. That drops the maximum SS contrib rate to 20%.

Secondly, there is a monthly upward limit to the taxable income for SS contributions. That limit varies by sub-sector of the contribution – i.e. the four mandatory deductions: old age pension, health insurance, accident insurance and long-term hospitalisation insurance. Those upper limits range between just over 1,000 EUR and just under 3,000 EUR. In Austria, there is only one upward limit, and as of 2004 that was around 4,025 EUR.

In sum, when these factors cut in, I will end up paying about 10% of my income for SS contribs, which is a fair tithe. Total deductions incl. income tax will come to about 20%.

During your first year as a freelancer here you do not have to pay into the SS plans. Health insurance of course is mandatory at all times, and it's pegged to your income. After I submitted my 2010 tax form my rate went up 48 EUR a month, up from 30 EUR or so.

Another question for translators in Austria:

In Austria, there is a general distinction between freelancer and self-employed. A freelancer (perhaps someone like an insurance agent who works from home but really for just one ‘employer’, the big insurance company) must pay the four deductions.

A self-employed translator (not working under any contracts with any quasi-employer, if I understand that right) pays only the old age and health insurance.

In Austria, are translators working from home for various clients freelancers or self-employed?


 

Sandra B.
Portugal
Local time: 15:20
Member (2005)
English to Portuguese
+ ...
In Portugal... Jun 23, 2011

If you are interested to know: minimum of 186 euros/month, no matter your income. It is mandatory. You can pay more. There are several levels, and the only benefit of paying more is that then you have a bigger pension state. The 186 gives you access to health public service, pension state (not much of course if you pay only that...), maternity allowance, etc.

Law has changed recently, and freelances will have to pay 29% of 70% of their gross income. This will start to be applied in the end of this year.


 

Lawyer-Linguist  Identity Verified
Portugal
Local time: 15:20
Dutch to English
+ ...
Portugal Jun 24, 2011

.Sandra wrote:

If you are interested to know: minimum of 186 euros/month, no matter your income. It is mandatory. You can pay more. There are several levels, and the only benefit of paying more is that then you have a bigger pension state. The 186 gives you access to health public service, pension state (not much of course if you pay only that...), maternity allowance, etc.

Law has changed recently, and freelances will have to pay 29% of 70% of their gross income. This will start to be applied in the end of this year.


Hi Sandra,

I've heard -- but admittedly haven't got round to searching for the info myself -- that SS can still only force us to go up one scale a year, when this kicks in. Have you heard or read anything to that effect?

Otherwise mine, for instance, is going to jump from EUR 186 to well over EUR 1,000 a month in one foul swoop - surely not? [*she gulps nervously*].

With things as they are, there are no guarantees at retirement age. Seems like an awful lot to be contributing towards what is effectively a large black hole at the moment.

Sigh ...


 
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