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WORKING IN SPAIN

Why does my salary vary between months in Spain if I’m a contract employee?

If you’re employed by a company in Spain, you may have noticed that what you get paid each month is sometimes higher and other times lower. Here's why this happens and how you can understand it better.

Why does my salary vary between months in Spain if I'm a contract employee?
If at the beginning of the year you received a raise, had a baby or opened a pension plan, it may mean that the tax withheld from your company will go up or down. Photo: StartupStockPhotos/Pixabay

Many asalariados (salaried employees) across Spain will have noticed that their wages at the beginning of 2022 may have been lower than that net salary they received at the end of 2021.

This is in fact usually not down to error, but comes as a result of your company withholding a higher amount of personal income tax (IRPF) at the start of the year, resulting in you getting paid less.

Companies in Spain are obliged to withhold a certain percentage of your salary called IRPF (Impuesto sobre la Renta de las Personas Físicas).

This, in turn, gets passed on to Spain’s Hacienda tax agency. Your gross salary and personal circumstances mean that the income tax withheld will vary.

Your employer will calculate the amount of your gross salary you must pay to the Treasury as personal income tax and will deduct it from your payroll month by month. This can be done between the 12 or 14 salary payments per year.

Alternatively, a lower percentage of tax may be applied in the first months of the year, which is then adjusted by raising it in the final few months of the year, or vice versa, which is why fluctuations can occur.

You should keep in mind that if at the beginning of the year you received a raise, had a baby or opened a pension plan, it may mean that the tax withheld from your company will go up or down. Having a new baby for example gives you a reduction.  

What if I believe there is an error in my IRPF calculations?

If you still believe there is an error, this can be rectified whilst filing your annual income tax return – la declaración de la renta – which you should each year between April and June.

READ ALSO – La Renta: The important income tax deadlines in Spain in 2022

If you receive an annual gross salary of less than €22,000, you are not required to fill out an annual tax declaration, but may want to do so if you believe that your employer has been deducting too much tax. If the error is found in your favour, Spain’s tax agency will return your overpaid tax.

How can I find out how much tax will be deducted in advance?

If you want to be prepared and find out exactly how much tax your company will deduct from your salary each month, you can fill out this tax calculator for 2022 found on the Hacienda website. This will let you know exactly how much IRPF should be deducted from your wage, depending on your personal circumstances. 

Your employer may also ask you to fill out the form Modelo 145 to help them work out how much tax you should pay.

The form will ask you for your current personal situation such as marital status, if you have children or other dependents. Depending on the outcome of this, you may get further discounts on the amount of tax that is withheld.

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TAXES

La Renta: What items can you deduct on your Spanish tax return?

Find out what costs you can and can't claim back on your annual Spanish tax return or 'declaración de la renta'.

La Renta: What items can you deduct on your Spanish tax return?

Spain’s annual tax return is known as the declaración de la renta and completing it or knowing what you can claim back as an expense can be quite tricky, particularly because there are many regional differences too. 

Anyone residing in Spain for more than 183 days and earning over €22,000 a year, who is self-employed (autónomo), or moved here in the last year, must complete it. 

Your Spanish income tax return has to be filed by June 30th for the preceding year, in this case for 2021.

READ ALSO – La Renta: The important income tax deadlines in Spain in 2022

There are many different allowances or deductions that can be made on your tax return such as deductions for couples, children, single parents, elderly parents, disabilities and large families, may of which we have covered in previous articles such as this one here

This article, however focuses specifically on costs that you can claim back on your tax return. For example, can you deduct rental or mortgage expenses, property tax or private health expenses? Read on to find out. 

READ ALSO: How to complete Spain’s Declaración de la Renta tax return

Spanish pension contributions

Up to €2,000 can be deducted for contributions to pension plans or up to 30 percent of the tax base (total income).

Property tax

Those who own a property in Spain will pay the yearly Impuesto Sobre Bienes Inmuebles, better known as IBI. This is similar to council tax in the UK and one of the expenses you can claim back on your annual declaration.

The costs of renovating your main home

Keep in mind, that you can’t just deduct the cost of any renovations on your home, particularly if they’re just cosmetic, but you can deduct for any renovations which reduce the demand for heating and cooling by at least seven percent. In this case, you can apply a 20 percent deduction, with a maximum of €5,000. 

Buying or rental costs of your main home

This expense can only be deducted by those who bought their property and signed the mortgage before January 1st, 2013 and must have included it in previous declarations. In the case of those who are renting, the signing of the contract must have been made before January 1st, 2015.

The tax benefit is up to 15 percent with a maximum limit of €9,040, while the maximum deduction will be €1,356.  

Some regions will also allow you to deduct further expenses if you buy a house in a rural area or habitually live in an area at risk of depopulation, such as in Andalusia, Cantabria, Castilla La-Mancha, Extremadura, Galicia, La Rioja and Valencia.  You can also deduct expenses for the cost of buying a residence for a particular group of people, be it young people in need, victims of domestic violence, disabled people or large families.

Donations

Donations of many kinds can be deducted on your annual tax declaration, whether they’re charitable donations, donations to cultural institutions, donations for scientific advancement, innovative technologies or the environment.

Generally, you can deduct 80 percent of the first €150 and 35 percent of any donations after that. If you have any doubts as to whether the donations you made last year can be included, it’s best to check with your accountant or gestor.

For educational studies and textbooks

Many times, you can deduct the cost of education and the textbooks associated with them. In general, you can deduct 15 percent of school fees; 10 percent of language courses and; five percent of the cost of purchasing clothing for exclusively school use.

However, this does not include claiming back for all courses, unless you are autónomo (self-employed) and they are designed to help improve your business. If you’ve taken a course, it’s best to check with your gestor or accountant to see if the fees can be included on your declaration as there are slight variations between regions too.

Investments in environmental installations (some regions only)

Many regions in Spain allow you to deduct costs of investing in environmental installations such as solar panels, thermal installations, and water-saving devices. This category also includes improvements made to your habitual residence due to disability or adaptation because of technical or structural issues. Some of the main regions you can deduct these expenses include Valencia, Balearic Islands, Canary Islands, Murcia and Galicia. Unfortunately, these are not included for Madrid or Catalonia.

Domestic help (some regions only)

In some regions in Spain, you can even deduct expenses for domestic help, such as cleaners, nannies or au-pairs. This is true in Madrid, Andalusia, La Rioja and Castilla y León.

Electric cars (some regions only)

Those who make an investment in buying an electric car may also be able to deduct the cost of this, depending on where they live. This is true if you live in Valencia, La Rioja and Castilla y León.

Standout regional differences

  • The Canary Islands and Cantabria are the only two regions that allow you to deduct private health insurance and other health-related expenses, but make sure you contact your gestor to find out exactly which health costs can be claimed for.
  • Andalusia is the only region where you can deduct legal expenses.
  • Public transport costs can be deducted in Aragón and Asturias.

Please note, we at The Local are not financial experts. What we’ve learned, we’ve learned the hard way — by getting on the phone and listening to all those frustrating automated messages. 

The information above is designed to help, but if you are in doubt or unsure of exactly what you can claim back, seek professional advice.

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