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Beginning in 2018, taxpayers with earnings exclusively from Local Lodging (Category B) will be exempt from SS contributions. Those who accumulate salaried income with self-employment earnings from “AL” will only be excused from monthly Social Security payments on their green receipts below a gross of €2,450 per month. Any excess shall be assessed at the rate of 21.4%. The measure is expected to encourage “AL” compliance which has already quadrupled over the past three years.
The Government has confirmed that, for independent workers under the Simplified Regime, Social Security deductions are to be based on net taxable income after application of the appropriate coefficient, not the gross received. In addition, overall Social Security deductions due may not exceed 10% of gross income from all sources.
Independent entrepreneurs in the Simplex system must still submit a Social Security annex together with their IRS tax return. The disputed annex was created in the previous legislature, but it created confusion. The new government now promises to examine this reporting scheme in the coming months.
Cleaning at regular intervals is an essential service in Local Lodging offerings. There are two methods of hiring cleaners: as an independent sole trader or as a domestic worker.
The first is by far the more common of the two. The Owner agrees to pay “X” Euros per hour for “Y” hours per day over an interval of “Z” (daily, weekly or monthly). Upon completion of the interval, the Owner pays the Sole Trader and the Sole Trader issues an electronic green receipt. The Sole Trader is solely responsible for his/her own Social Security contributions.
The same method applies when using a cleaning company.
The second method is as a Domestic Worker. Here there are three contractual options:
- Hourly: a minimum of 30 hours per month. Retentions from pay to the Domestic Worker will be at 50% on an annual basis;
- Monthly: Minimum of 80 hours/month where the worker has full normal rights and privileges;
- Full time: where the minimum wage is €419.22 X 14 per annum.
For Social Security contributions, the basic hourly wage is €2.42 per hour. Total SS contributions are 28.6%; 19.9% is paid by the employer and 9.6% by the Domestic Worker. The full SS monthly payment is €79.23.
In a new hiring situation, the Sole Trader method is usually simpler and more flexible for all. If the arrangement proves long-term, the position can evolve into a on-going Domestic Worker contract.