Personal income tax (IRPF)

Personal income tax (IRPF) is a personal, direct tax that, according to equal, general and progressive principles, taxes the income of natural persons in accordance with their nature and their personal and family circumstances.

Personal income tax is applied directly to salaries, and the payer (UPC) is obliged to withhold and subsequently remit the tax withheld to the Tax Agency. Later, when individuals file their tax return, these amounts advanced by the UPC are formalised.

The withholding rate is the result of applying the Tax Agency's current regulations. To calculate the withholding rate, the personal and family circumstances stated by the employee in Form 145 are taken into account, as well as the gross (fixed and variable) salaries that they are due to receive from the UPC during the tax year in view of the term of the contract/employment that is current at a given time.

Any variation in these details (personal and family circumstances, extensions, changes in salary, leave/return to work, new contracts, etc.) causes the personal income tax withholding rate to be recalculated.

• Initial contracts/appointments

Salaries paid by the UPC below €15,876 (per tax year and payer): 0% personal income tax withholding.

If you have had a previous employment relationship or another payer and this means that the total amount you will receive in the tax year is more than the salaries paid by the UPC, you can apply for a voluntary income tax withholding rate (which will be applied whenever this is more than the rate that the UPC is legally bound to apply).

• Variations in employment in a tax year (extensions, changes in salary, leave/return to work, etc.)

Variations in employment in the same tax year cause the personal income tax withholding rate to be recalculated.

The later in the year the change occurs, the greater the impact on the withholding rate, as the adjustment is applied from the month in which the change occurs until the month of December but considering the salaries of the entire tax year.

If the economic details change at the beginning of the year (in February, for example), the impact on the rate will be less, as the adjustment will take place over 11 months, from February to December.

Example of the effect on personal income tax of variations in the same tax year:

• Start of the contract 01/06/2023.
• Details of the contract:
  • Initial term 1 year, from 01/06/2023 to 31/05/2024.
  • Gross monthly salary of €2,100 (with proportional extraordinary payments) of a person in situation 3, with no dependants.
• For calculating personal income tax the sum of the gross monthly salaries from June to September is taken into account (as the calculation is always per tax year).

Given it is one-year contract and the sum of the salaries that the employee will receive from the UPC (€14,700) does not exceed the minimum amount to which a withholding rate can be applied, a personal income tax withholding rate of 0.00% is applied to all salaries in 2023, from June to December

A new tax year begins in 2024, so personal income tax is calculated considering the sum of the salaries to be received from the UPC (€10,500), from January to the end of the term of the contract; in this example, 31/05/2024.

If a one-year extension is agreed (under the same conditions), starting on 01/06/2024, in that same month, June 2024, the personal income tax withholding rate is calculated again; in this case, the following is taken into account:

• The total income receivable in 2024 (salaries received from January to May, plus salaries to be received from June to December).
• Tax Agency regulations:

According to Tax Agency regulations, this total amount (€25,200) must be subject to a given personal income tax withholding rate for the whole year (for the example, let us say 15%). This rate would have been applied every month if the term of the contract had been continuous, from January to December, but in our example the contract started in 2023 and a personal income tax withholding rate of 0% was applied to the salaries from January to May 2024. Therefore, personal income tax must be adjusted from June to December 2024 to compensate for the months in which the withholding rate was 0%.

This adjustment means that the personal income tax withholding rate to be applied to the salaries from June to December 2024 is higher: 24.39% rather than 15%

Please bear in mind that the details are approximate and have been provided for the purpose of illustration and to make the example more understandable.
 

• Effect on personal income tax of leave for the birth or care of a minor in the Social Security system.

If a UPC employee is on leave due to the birth or care of a minor, the body who pays the salaries during this time is the Social Security. This means that the UPC cannot count this income as a tax base for calculating personal income tax and so, when the leave ends, the personal income tax rate may drop considerably. In this case, you can ask for a voluntary income tax rate to be applied.

You must provide your personal and family data so that we can calculate the real percentage of personal income tax to be deducted from your gross pay.

You must send this information before the first day of each calendar year or at the beginning of your employment relationship.

If your initial conditions change, you must notify the Personnel Service of the changes. Cases in which changes occur:

a) The number of your descendants changes.

b) The number of forebears dependent on you changes.

c) You, your descendants or your forebears suffer a disability or the degree of disability in any of these cases changes.

d) A legal ruling on alimony or child support is made.

e) Your spouse obtains income of more than €1,500 in the calendar year.

f) You were previously registered as unemployed at an employment office and you accept a job that involves moving to a new town. The reduction for this reason will be applied in the tax period in which your change of residence occurs and in the following one.

g) You become a taxpayer because of a change of residence (this must be understood as a tax residence, that is, more than 183 days in the calendar year).

h) You have earned income in a period of more than two years during previous tax periods subject to a reduction in withholding tax because of irregular earnings, as referred to in Article 18.2 of the Tax Law, but this reduction was not applied in the self-assessment.

Children and other descendants

You may incorporate in your statement for personal income tax any children and other descendants who meet the following requirements:

1. They are single.
2. They are under 25 years old or have a disability.
3. They live with you. Descendants who depend on you but reside in a specialised centre are also understood to live with you.
4. Their annual income, excluding exemptions, does not exceed €8,000.

In the event of adoption, or pre-adoptive or permanent fostering, the reduction may be applied, regardless of the age of the minor, in the tax period in which they are entered in the Civil Registry and in the following two. When registration is not necessary, the reduction may be made in the tax period in which the legal ruling is made and the following two.

When they live with both parents, the descendants are calculated by halves (that is, each spouse enjoys a reduction in equal parts for each child). When the taxpayer has sole care of the descendants (for example in a one-parent family) they are entitled to the whole reduction per child.

Forebears

You may incorporate in your statement for personal income tax any forebears who meet the following requirements:

1. They are over 65 years old or have a disability.
2. They live with you for at least six months a year. Forebears who depend on you but reside in a specialised centre are also understood to live with you.
3. Their annual income, excluding exemptions, does not exceed €8,000.

If the forebear fulfils the above requirements but lives for half the year with other descendants, the total number of descendants, including you, must be entered in the statement.

When two or more taxpayers are entitled to apply this reduction, the amount will be divided equally among them.

Repayment of loans for the purchase or rehabilitation of the habitual dwelling

If you are making payments for loans used to acquire or rehabilitate your habitual dwelling (if it was purchased, or payment of rehabilitation works was made, before 1/1/2013) and earn less than €33,007.20 per year,* you can ask the company to reduce the percentage of withholding tax.

* Please bear in mind the following:

If you receive income simultaneously or successively from two or more paying agencies, the full annual income from all paying agencies will be taken into account.

Form 145 must be submitted, following the instructions in the document: "Instructions for completing Form 145", in this e-services portal form.

Depending on the reason for submitting the form, it must be accompanied by the corresponding supporting documents, as specified in the following section (Supporting documents).

Form 145 must be accompanied by the documents listed below:

• In the case of the birth, adoption or fostering of a child: family record book or resolution on the adoption or fostering.

• What happens if my pay changes as a result of promotion, demotion or any other reason during the tax year?
  The withholding rate will be adjusted.

• Do I need to present the “Model 145” form every year?
  You do not need to present it in each tax year unless your personal and family circumstances change.
  You may send notification of any changes in your personal and family circumstances that occur during the year and entail a change in the rate of withholding tax. The resulting adjustment will have effect from the first recalculation of personal income tax following the notification.

• You must use the “Model 145” form to notify the UPC of any change in your personal circumstances that leads the UPC to apply a different rate of withholding tax.
  Failure to notify the paying agency (UPC) of your personal and family circumstances or of any changes in them will lead the UPC to apply the rate without taking into account these circumstances, without prejudice to any responsibilities that you may have if your failure to notify such changes leads to the application of a lower rate than the corresponding one.
   
• Repayment of loans for the purchase or rehabilitation of the habitual dwelling
  You must send the notification from the moment when you incur expenditure for the purchase or rehabilitation of your habitual residence using external finance. It will have effect in the first recalculation of your personal income tax following the notification.
  In contracts or relationships of less than one year, the interest rate may not be less than 2%. In some cases, this reduction may not apply if the interest rate is less than 2%.
   
• Influence on personal income tax of maternity or paternity leave paid by the social security system
  When you have been on maternity or paternity leave, the pay you receive during this period comes from another paying agency: the social security system. The UPC does not compute this pay in the taxable base for the purpose of applying personal income tax, so the percentage deducted after the leave is much lower.
  In general, you are not obliged to file an income tax declaration if your income does not exceed €12,000 per year.
  In this case, anticipating the result of the declaration, you can request a one hundred percent voluntary withholding (which can be the percentage of the last salary before the leave).
   
• Temporary contracts/appointments
  
  • During the first year of the employment relationship and within the same fiscal year, your personal and family situation and the annual income that you are expected to receive affect the calculation of the rate of personal income tax applied. If this situation changes, it will affect the rate of personal income tax that is applicable to the different periods of recruitment or extension of temporary contracts/appointments.

  • In temporary contracts/appointments, the percentage is calculated in accordance with expected remuneration and the term of the contract in that tax year.

    If there is a previous employment relationship or a change in the relationship during the tax year, you may apply for a voluntary withholding of personal income tax (as long as this is greater than the tax authority demands).

  • Any change in the employment relationship within the same tax year (extensions, changes in salary, leave, etc.) leads to a recalculation of the percentage of income tax withheld. The later in the year that the change occurs the greater the percentage withheld, because the adjustment is made from the month in which the change occurs up to December.

  • If the change occurs at the beginning of the year (for example in February), the impact on the rate will be lower because the amount will be adjusted over eleven months, from February to December.

Example 1

A person with family situation 3, without children and with a gross income of €25,000 per year.

The withholding tax calculated in January for the whole year will be 15% and the annual amount of withholding tax €3,750.

In February, they start to earn €30,000 per year. The new rate to be applied after the change will be 17.14% for the months from February to December, and the annual amount of withholding tax €5,142. As €312.50 was withheld in January, €4,829.50 must be withheld from February to December, or €439.04 per month.

If the change occurs at the end of the year (for example in November), the impact on the rate will be lower because the amount will only be adjusted over two months, from November to December.

Example 2

A person with family situation 3, without children and with a gross income of €25,000 per year.

The withholding tax calculated in January for the whole year will be 15% and the annual amount of withholding tax €3,750.

In November, they start to earn €30,000 per year. The new rate to be applied after the change will be 21.53% for the months from November to December, and the annual amount of withholding tax €6,459. As €3,125 was withheld since January, €3,334 must be withheld from November to December, or €1,667 per month.

• Voluntary withholding tax application form

• Resolution of 3 December 2015 of the Department of Tax Management of the State Agency for Tax Administration, which modifies that of 3 January 2011 approving the “Model 145” form for earned income receivers to notify their paying agency of their data or of changes to their data.
   
• Royal Decree Law 9/2015, of 10 July, on urgent measures to reduce the tax burden of payers of personal income tax and other measures of an economic nature.
   
• Law 26/2014, of 27 November, which modifies Law 35/2006, of 28 November, on personal income tax, the recast text of the Law on income tax of non-residents approved by Legislative Royal Decree 5/2004, and other tax regulations.

The percentage of withholding tax applied to the salary is calculated automatically by the Spanish Tax Agency's program, which takes into account your personal and family situation, as declared in the Model 145 form, the gross pay that you are expected to receive from your employer during the tax year, and the contractual conditions.

The interested person can request a voluntary withholding, as long as this request is higher than that established by the Tax Agency.

You can apply for a voluntary rate of withholding tax through the Service Manager on the UPC Staff Portal: PUC - Personal

The application must specify the percentage of withholding tax that you wish to be applied.

• The voluntary withholding tax will be applied to your next salary payment, provided that the application is made before the 15^th day of the month, except in July, August and December, when it must be made before the 10^th day (July 10th also for August) .
• This percentage will be applied until you request otherwise or until the Tax Agency program calculates a higher one, in which case the latter will be applied.

• Modifying information for calculating withholding tax

Determination of tax residence

A natural person is resident in Spain under any of the following circumstances:

• If they stay in Spanish territory for more than 183 days during a single calendar year (in the year of arrival or in the following year if the stay is less than 183 days in the year of arrival). Temporary stays arising from unpaid obligations entered into through cultural or humanitarian cooperation agreements are not taken into account. 
• If the main basis of their activities or economic interests is directly or indirectly rooted in Spain.
• If the spouse (not legally separated) and minors who depend on the individual habitually reside in Spain.
   

Please bear in mind the following:

Proof of tax residence

Tax residence is proved by means of a certificate issued by the competent tax authority of the country in question.

Tax residence in Spain is automatically proved if the period of residence in Spain has not been interrupted.

For tax residence in another country, the period of validity of the certificate is one year from the date of issue.

Therefore, a person may have a residence permit in a country, or residence there for administrative purposes, but not be considered a tax resident.

The form in which a natural person or entity is subject to taxation in Spain is based on whether they are residents in the country.

Taxpayer status is determined by the government (not by the taxpayer), so without the certificate issued by the government, a non-resident CANNOT be considered a taxpayer for the purpose of withholding tax.

To be considered tax residents in Spain, non-residents must present the model 145 and the documentation proving that you are considered a tax resident in Spain to the e-services portal form :

• A document from the Spanish Tax Agency certifying tax residence, with a current date.
• AEAT resolution, with the response to the processing of form 147

Employees who submit to the UPC a certificate of tax residence in Spain issued by the Spanish Tax Agency will be subject to the general legislation on income tax from the date of submission.

If you do not submit this certificate, the legislation on non-residents will apply, so the general rate of personal income tax will be 24% until 183 days have passed in the calendar year, unless you can prove that you are a resident of an EU country, Iceland or Norway, in which case the rate will be 19%.

Employees who have not resided in Spanish territory for 183 days in any one year but can prove that they expect to stay in Spain for over 183 days may ask the Spanish Tax Agency to apply the general income tax legislation by filling in the form “Model 147”.

These agreements allow non-resident natural persons to avoid double taxation in Spain and their country of residence. Interested parties must prove their non-resident status in Spain by providing the certificate issued by the tax authorities of their country of residence.

When these conditions have been met, the type of withholding tax will be indicated in the corresponding double taxation agreement.

Countries with which Spain has signed agreements to avoid double taxation:

EUROPEAN UNION: Germany, Austria, Belgium, Bulgaria, Czech Republic, Denmark, Slovak Republic, Slovenia, Estonia, Finland, France, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, United Kingdom, Romania and Sweden.

OTHER EUROPEAN COUNTRIES: Croatia, Iceland, Macedonia, Norway, Russian Federation, Switzerland, Turkey, the former USSR (applicable to Ukraine, Belarus, Moldova, Georgia, Armenia, Azerbaijan, Kazakhstan, Turkmenistan, Uzbekistan, Tajikistan and Kyrgyzstan), Serbia, Albania, Cyprus, Bosnia and Herzegovina, Andorra and Montenegro.

AMERICA: Argentina, Bolivia, Brazil, Canada, Chile, Cuba, Ecuador, United States, Mexico, Venezuela, Jamaica, Colombia, El Salvador, Trinidad and Tobago, Dominican Republic, Costa Rica, Panama, Barbados, Uruguay and Peru.

ASIA: Korea, China, United Arab Emirates, Philippines, India, Indonesia, Iran, Israel, Japan, Thailand, Vietnam, Malaysia, Saudi Arabia, Kuwait, Singapore, Pakistan, Bahrain, Qatar, Hong Kong, Oman and Syria.

AFRICA: Algeria, Egypt, Morocco, Tunisia, Senegal, South Africa, Cape Verde, Namibia and Nigeria.

OCEANIA: Australia and New Zealand.

• Royal Legislative Decree 5/2004, of 5 March, approving the recast text of the law on income tax of non-residents (Official Gazette of the Spanish Government of 12 March 2004).
• Order HAC/117/2003, of 31 January
• Order EHA/1371/2006, of 4 May