Incomes and taxation
Each worker receives a wage that consists of a regular remuneration, normally paid once monthly.
The employer is empowered to deduct tax and social security contributions that are legally due on the monthly pay of workers. Below are examples of gross and net pay, in other words, before and after the corresponding deductions have been made.
These represent average wages calculated for a worker aged under 65, working a 40-hour week and without taking into account extra payment, allowances or other bonuses. Social security deductions are 6.3% and in this case the income tax withheld is 10%. The amount of income tax withheld depends on the worker’s family situation, the duration and the type of the work contract.
It is 25% for people who are not resident for tax purposes, except for farm workers, for whom the deduction is 2%.
|Profession||Monthly Gross Pay||Social Security||Income Tax||Monthly Net Pay|
|Waiter||€ 818.89||€ 61.14||€ 81.89||€ 675.86|
|Teleoperator||€ 925.44||€ 69.10||€ 92.54||€ 763.80|
|Industrial engineer||€ 1 809.14||€ 135.08||€ 180.91||€ 1 493.14|
|IT technician||€ 1 014.96||€ 75.78||€101.40||€ 837.68|
|Administrative worker||€ 762.26||€ 56.92||€ 76.23||€ 629.12|
|SMI [National Minimum Wage]||€ 648.60|
1. DIRECT TAXES
A. Personal Income Tax (IRPF): Charged on all income obtained from work, professional or business activities, investments and wealth.
The sum is calculated on the basis of the volume of income earned in the tax year, which coincides with the calendar year, and it is a progressive tax (the higher the income, the higher the percentage of tax) starting at a minimum figure that is exempt from declaration. The obligation to declare starts from EUR 22 000 per year from a single income source (employer).
This tax is declared during May and June of the year following the tax year in question, and failure to declare or declaration after the deadline will lead to a fine being imposed.
In general, if you live in Spain for 183, or more, days during a given tax year, you will have to declare all your income there, regardless of where you earned it. In determining one’s ‘tax residence’, however, other considerations may be taken into account, such as close personal and economic ties, residence of family members, the place where most of the work is done and so on, so it is advisable to find out and fix your tax residence, if there are any doubts.
If you have worked in Spain for less than 183 days and then are going to move to another EEA country, you can request the return of a proportion of the deductions made under your name. To do this, submit form 215 to the Tax Agency, a certificate of residency in the country to which you are moving and a certificate of the deductions made. The deadline for applying for deductions to be returned is four years.
B. Corporation tax: This is very similar to personal income tax (IRPF) but it applies to legal entities. The rate of taxation currently stands at 30% for large businesses and 25% for smaller businesses (SMEs), but there are also other special types.
C. Tax on inheritance and donations: Levied on goods and services inherited by a successor or gifted between the living.
2. INDIRECT TAXES
A. Value-added Tax (VAT): This is levied on the supply of goods and services by employers and professionals and on imports. The rates of taxation vary between 4%, 10% and 21%, depending on the type of goods, and without prejudice to statutory exemptions.
B. Tax on capital transfers and documented legal acts: This is levied on legal and commercial documents and particular transactions, such as the purchase of fixed assets and the establishment of mortgages.
There are also other EXCISE DUTIES which are levied on the consumption of particular goods such as alcohol, tobacco and fuel.
In addition to these State taxes transferred totally or in part to the Autonomous Communities, other LOCAL TAXES are levied by municipalities such as tax on property or vehicle tax.