Understanding the conditions that govern payroll in Spain is important if you want to do business in the country. Likewise, this knowledge is vital to comply with all the laws and regulations that the government demands from businesses. This will ensure that you have a successful history in the country and avoid fines.
In this article, you will learn more about the Spanish salary calculations, as well as the amount for the tax rate. Also, how it is handled when a person is a resident or not of the country and other details of the payroll.
Taxation and payroll compliance in Spain
Regarding the payroll in Spain, you should consider that the country has 2 subsystems applied to resident and non-resident taxpayers. Thus, in the first case, citizens must pay income tax on the income obtained globally. In contrast, non-residents only have to pay income tax on profits made in the country.
Moreover, the authorities have established the characteristics of residence for tax purposes according to the criteria mentioned below:
- People who spend more than 183 days in a regular year in the country.
- People with their center of interest in Spain, that is, family, life, and more.
In addition, for residents, the income tax rates range from 19% to 47% as follows:
- Up to EUR 12,450 – 19%
- Between EUR 12,450 and EUR 20,200 – 24%
- Between EUR 20,200 and EUR 35,200 – 30%
- EUR 35,200 to EUR 60,000 – 37%
- EUR 60,000 to EUR 300,000 – 45%
- More than EUR 300,000 – 47%
However, in the different regions of Spain, the said rates vary because the contribution is given in two parts. In this case, one of them comprises the state government and the other the regional government. In addition, workers must provide their employers with personal tax information for the payment of income tax.
Likewise, the calculation for said tax in payroll processing Spain should include salaries, allowances, bonuses, as well as other benefits. For their part, deductible items are social security contributions and employment expenses. There are also some allowances and reductions available, such as child support or contributions to pension payments.
Key tax regulations for Spanish payrolls
In Spain, you will find that there is an income tax rate that increases according to the salary of the employee. Likewise, non-residents must also pay withholding taxes required by national law. In this case, they can go from 19% in dividends and interest, up to 24% in royalties, so you should be aware of this.
Tax relief and allowances in Spanish payrolls
As we mentioned, the payroll in Spain must take into account the personal and family allowances of the workers. Thus, currently in Spain, it consists of the following aspects:
The personal allowance in Spain amounts to about EUR 5,550, being EUR 6,700 for people over 65 years of age. Likewise, taxpayers over the age of 75 obtain a personal allowance of EUR 8,100. However, for taxpayers in a state of disability, the amount has an increase of EUR 3,000.
Nevertheless, if the disability of the taxpayer is 65% or more, the increase in the allowance is EUR 9,000. On the other hand, EUR 3,000 is added to the minimum for assistance expenses in case the taxpayer can demonstrate that he/she needs them. Also, this applies if you can prove that you have reduced mobility or that your disability reaches at least 65%.
As for the family subsidy, it has a minimum amount of EUR 1,150 for each family member over 65 years of age. However, the relative or relatives must be in the ascending line, they must be under your responsibility, and they must be part of the household. In addition, the annual income must not be greater than EUR 8,000. If the family member is over 75 years of age, the amount of the subsidy rises to EUR 2,550.
In this order, there is an allowance for the first family member in the descending line of EUR 2,400, as long as the annual income does not exceed EUR 8,000. Likewise, for the 2nd, 3rd, and following family members, the amount is EUR 2,700, EUR 4,000, and EUR 4500 respectively. Moreover, said benefit increases by EUR 2,800 if the family member of the taxpayer is less than 3 years old.
Disability family allowance
Another point to consider for Spanish salary calculations is the subsidy for family members for disability. In this case, it is for family members in ascending and descending lines and consists of EUR 3,000 for each family member. However, if the level of disability of the family member is 65% or higher, the subsidy rises to EUR 9,000.
However, as with the personal disability allowance, the minimum rises by EUR 3,000 more in assistance costs. This is for each family member who can certify that they need care, have reduced mobility, or have a disability of more than 65%.
In any of these cases, if 2 taxpayers or more must receive these bonuses, they are divided equally. However, if the taxpayers are related to different degrees, the deduction will apply to the taxpayer with the highest degree. However, they will not apply if the annual income (not exempt) is not greater than EUR 8000. Therefore, they will apply to the taxpayer with the next degree of kinship.
For their part, said bonuses do not apply to family members with incomes greater than EUR 1,800. Also, they do not apply if said family members file their tax returns. Likewise, the indicated thresholds apply on the date the tax is due, that is, until December 31.
Regarding marital separations, the parent with guardianship applies to the assignment to relatives in the descending line. This will apply on the accrual date on which the guardian has custody of the child or children. However, if custody is shared by the parents, the allowance is prorated regardless of who the child or children live with.
Tax deductions in Spanish Payrolls
As part of the payroll in Spain, the employer must withhold income tax from the salary of its employees. In addition, you must declare the said amounts withheld from workers to the tax authorities of the country. In this case, the entity that governs this aspect is the State Tax Administration Agency.
On the other hand, independent local authorities collect taxes at the regional level. Employers must make income tax deductions from the wages of their employees monthly. However, the frequency of filing deductions that the employer must file varies.
In this way, companies that have an annual turnover of EUR 6040121.04 must submit them monthly (until the 20th of the following month). On the other hand, companies with a smaller volume must pay the tax quarterly within the established deadlines. These are the following:
- April 20th
- July 20th
- October 20
- January 20 for the previous quarter.
Furthermore, if you do not pay the income tax by the due date, you will have to pay a fine. In any case, as part of payroll regulations Spain, you must file the statement separately monthly or quarterly. In this case, you must indicate the amounts of wages paid, as well as the taxes withheld from such wages.
Additionally, there are 2 different forms for the declaration of resident employees and non-residents. The same is also true for the annual declaration forms, in which, in both cases, you must submit them electronically.
For their part, workers must file an individual declaration if their income exceeds EUR 22,000. Hence, they receive an annual tax certificate showing the amount withheld from their salary in the tax year. Moreover, they must present it between May 2 and June 30 of the following year, with the spouses being able to file joint returns.
Key considerations for payroll in Spain
You must take into account that the payroll in Spain is a process that must be carried out monthly. Generally, you must pay your employees between the 25th of the month and the 5th of the month following the month of payment. Likewise, the payment must be made in the legal currency of the country, which, in this case, is the euro (EUR).
Also, to comply with the regulations, the employer must provide its employees with a pay stub. Said receipt must include the following aspects:
- The total amount of payment, together with the days worked, and indicates the net salary
- Tax deductions
- Social Security Deductions
- Contributions to social security by the employer
- Employee Personal Information
- Job details
- Information about the employer (tax number, contribution account code, and more).
In addition, the employer must bring the payroll in Spain in the pre-established format, which can be delivered on paper or electronically. Also, you must keep your employees’ payroll records for at least 4 years.
Social security and benefits in the Spanish payroll
As part of the payroll in Spain, the employer must withhold Social Security contributions from employees. In addition, you must also make your contributions along with the monthly contributions of the workers. The employer must contribute 29.9% of the social security contributions.
Moreover, it must include the payment to the unemployment fund, the salary guarantee fund, and the professional training fund.
On the other hand, from the salary of the worker, there will be a quota of 6.35% destined for social security. This calculation will be made based on the salary of the employee. Furthermore, any cash payment that he/she receives from the employer as well as benefits will be taken.
You must note that these contributions are necessary when the income of the employee is greater than EUR 1,125.90. However, there is the possibility of applying a higher amount depending on the position of the employee in the company. In addition, income contributions that exceed 4,139.40 euros should not be due, which is the maximum base established for contributions in 2022.
All these payments must be made on the last day of each month following the Social Security Treasury. In the same way, there is SILTRA, which is an official platform for the administration of social security.
On the other hand, compensation for insurance for work accidents varies according to the occupation of the worker and will be paid separately. Moreover, the employer can establish an additional pension benefit for its workers. In this sense, the employer will submit to the tax authorities, an annual statement before January 31 based on the previous year.
Locals vs. ex-pats payroll considerations in Spain
The considerations of the Payroll in Spain for locals and expatriates are the following:
Legal Variations in Local and Expatriate Payroll
Citizens who are not residents will pay a tax of 24% and 19% of those who have a residence in another state of the European Union. Likewise, residents with more than 183 days of the fiscal year or with a main operations center in Spain, will pay the universal income tax. Likewise, foreigners will pay tax based on income from Spanish sources. Also, the rate may be deductible depending on the country of origin if non-double taxation is agreed upon.
In addition, there is a standard tax-based rate and progressive rates from 9.5% to 22.5%. Likewise, apart from these taxes, a local tax can be applied according to a table for each important Spanish region. For this reason, the rates vary for residents depending on the region where they are located:
- 0 to 12,450 EUR 9.5% (+9.5% local tax)
- 12,450 to 20,200 EUR 12% (+12% local tax)
- 20,200 to 35,200 EUR 15% (+15% local tax)
- 35,200 to 60,000 EUR 18.5% (+18.5% local tax)
- 60,000 to 300,000 EUR 22.5% (+22.5% local tax)
- More than 300,000 EUR 23.5% (+23.5% local tax)
In addition, there is the savings tax to which it is applied as follows:
- a rate of 19% up to 6,000 EUR,
- 21% for,000 and 50,000 EUR
- and 23% up to 200,000 EUR; and 26% on savings of more than 200,000 EUR
Likewise, the Wealth Tax rate is on the values that are in the taxpayer’s possession until December 31. With progressive rates from 0.2% to 2.5% that vary according to the local government.
Special moderation in payroll in Spain for foreigners
Foreigners pay a fixed rate of 24% based on the basic salary, which means that no deductions or gratuities will be granted. For residents of the EU or EEA countries that have a tax information exchange, the rate is 19% and pensions are imposed at a progressive rate from 8% to 40%. The progressive rates for pensions are assigned at 19% and 24% and for royalties,
However, a citizen assigned to work and reside in the country has the option of paying taxes as a non-resident for 6 years. Likewise, if the work was done for a permanent entity or company that is not resident in the country at the fiscal level with a similar tax.
You have already learned how payroll in Spain and its regulations for each situation of the worker. In addition, the rates vary according to the category or function that the worker performs. But, if you want to know more about payroll management in this country or if you have any questions, contact us and we will answer all your concerns.