Income tax for employees in Spain, although not directly relevant to freelancers (for whom this is a whole other story), is something lots of you come to this blog looking for, so today I thought I’d take the time to take a mini-diversion and write about it.
How much income tax do Spanish workers have to pay?
The closest Spain has to income tax is the IRPF, Impuesto Sobre la Renta de Personas Físicas or Tax on Earning of Physical People (as opposed to entities). As well as IRPF, employees in Spanish companies also pay, along with their employers, Social Seguridad (National Insurance Contributions).
The new Reforma Fiscal (Fiscal Reform) introduced in 2015 maps out changes to income tax levels in Spain in 2015-16. There are national elections in 2015, so in theory the new government could change income tax bands when they are elected, but in practice this would take too long to pass through and is unlikely.
The table at the bottom shows income tax rates as they will be over the next couple of years (full credit and many thanks to www.elblogsalmon.com for producing this). “Base imponible” refers to base yearly salary. As you can see, the main difference is that IRPF rates will be lowered – not just for those earning the lower wage brackets, but also those earning over €600,000 per year. So in real terms, while someone on a salary of €12,000 will have to pay €570 less in income tax in 2015 (presumably, the government expects that they will be able to use the extra money to buy some more logs to heat their hovel with), someone earning €600,000 will have to pay €22,487.25 less.
Photos and text by Penelope. Table showing tax rates by El Blog Salmón.