Tax Year 1 st January to 31 st December An overview of Spanish Payroll
What we’ll cover: • Facts about Spain • Spanish business culture • Employer obligations • Rights and responsibilities • Reporting • Employment law • Tax • Social security • Deductions • Absences • Month 13 and 14 payments
• Compensation and benefits • How to read a payslip • Example scenario's • Setting up a legal entity in Spain
Scenario's
Senarios For reference all examples are based on: • The Collective Bargaining Agreements of Offices, for Madrid. ( Oficinas y Despac hos de Madrid) • On each CBA, the salary table is provided therefore the employees base salary is stipulated, if the employer has agreed a higher salary this will be captured in a V oluntary improvement pay element. See below the salary table for this CBA • Monthly gross salary = 1.207,28 € and the annual = 16.901,94 € ( 1.207,28 € x 14) • Standard payroll is run on a 30 day month • NOTE Instalments are 14 however they can be paid separately or prorated across 12 months. This is the method we have used as is accepted common practice
Senarios
Senario 1 Single person, earning € 60, 000 pa and has a company car, value € 28000, compa ny pension scheme ‐ employee contribution 5% and employer contribution 8 %. Works standard 40 hr week We will look at how gross pay, tax, social security, pension and net pay are calculated
Senario 1 Annual Gross salary 60.000 € / 12 months = 5.000,00 € per month Base salary as per CBA = 1.207,28 € 2 extra pays to be prorated 5.000 € / 12 = 416.66 € x 2 = 833,34 € Voluntary Improvement = 5.000,00 € ‐ 1.207,28 € ‐ 833,34 € = 2.959,38 € Employer Pension Plan Contribution = 8% on 5.000,00 € per month = 400,00 € Employee Pension Plan Contribution Deduct = 5% on 5.000,00 € per month = 250,007 € Company car = The calculation of the company car would be: 20% x € 28000 x 40% personal use / 12 months : 28.000,00 € *20%= 5.600,00 € *40%= 2.240,00 € / 12 = 186,67 € monthly BIK amount Benefit in kind deductions = 400,00 € ER PP + 186,67 € Company Car = 586,67 € EE Social Security deductions = All earnings are niable however there is a social security ceiling taxable base of 3.642,00 € for 2016 on which a 6.35% is niable for the employee. In this scena rio, even though the employee has higher income, is capped. ER Social Security deductions = 31.25% of the niable taxable income IRPF (PAYE deductions) = All earnings are taxable and a 25,56% is applicable for this salary
Senario 1
Senario 1 Gross to net:
Senario 1 Tax rate check with the Tax Office:
Senario 2 Married person, spouse earning, salary is € 40, 000 pa, company pension scheme ‐ emp loyee contribution 5% and employer contribution 8%. Works standard 40 hr week We will look at how gross pay, tax, social security, pension and net pay are calculated
Senario 2 Annual Gross salary 40.000 € / 12 months = 3.333,33 € per month Base salary as per CBA = 1.207,28 € 2 extra pays to be prorated 3.333,33 € / 12 = 277,77 € x 2 = 555,56 € Voluntary Improvement = 3.333,33 € ‐ 1.207,28 € ‐ 555,56 € = 1.570,49 € Employer Pension Plan Contribution = 8% on 3.333,33 € per month = 266,67 € Employee Pension Plan Contribution Deduct = 5% on 3.333,33 € per month = 166,67 € Benefit in kind deductions = 266,67 € € ER PP EE Social Security deductions = All earnings are niable on 6.35% for the employee. ER Social Security deductions = 31.25% of the niable taxable income IRPF (PAYE deductions) = All earnings are taxable and a 19,23% is applicable for this s alary
Senario 2
Senario 2 Gross to net:
Senario 2 Tax rate check with the Tax Office:
Setting up an Entity in Spain
Corporations Types Basic overview New Spanish Company Similar to the LTD in UK, must have a minimum paid up capital of 3.000 Euros Subsidiary New Spanish entity formed to be a direct subsidiary of the holding overseas company with trading/business activities in Spain: must have a minimum paid up capital of 3.000 Euros Branch Overseas company registers a branch with the same legal identity as its holding company at Registro Mercantil International Payroll Overseas company with only marketing activities in Spain, (no operating or trading activities) Permanent Establishment Overseas company with activities (P.E) in Spain, (operating or trading activities)
Responsibilities Of The Administrators / Directors Of Spanish Companies (including branches) Common for all company structures Rights Obligations - Manage the Company - Manage the company affairs - Operate bank accounts - Comply with legal - Enter into contracts binding the requirements Company - Not to enter into conflicts of - Acquire and sell assets interests - Acquire liabilities, including borrowing - Hire and fire staff
Common for all company structures Fiscal representative • Ensure that the entity representing complies with all tax and social security obligations in Spain • Meets all applicable statutory requirements • Personal responsibility for the payment of taxes and social security not met by the company
Main differences Branch Subsidiary • • No legal minimum capital Minimum capital share of € share 3,000.00 • • Same legal entity as its holding Separate legal entity company • Shareholders liability is limited • No limit to the holding to the amount company’s liability of the capital contributions
Setting up a new Spanish company Similar to the LTD in UK, must have a minimum paid up capital of 3.000 Euros Some of the basic requirements are: – Opening of bank account and deposit of the initial share capital – Decide on the method of administration, management and percentage participation of shareholders – Obtain a NIE number for all individual shareholders and directors, and a CIF for corporate shareholders – Decide on where the registered office will be – Decide on the company objects / activities – All shareholders and directors have to be present at the setting up meeting with the Notary, or represented by way of a power of attorney – Approve the standard draft of Articles of Association produced by the Notary and execution of the public deed of incorporation before the said Spanish Notary Public
Setting up a New Spanish Company Details/ Legal Documents • Certificate of clearance of the corporate name issued by Registro Mercantil (Spanish Company Trade Register Office) in Madrid • Original bank certificate for the initial capital deposited • Personal details of all shareholders and directors and copies of their passports legalized by Notary Public and duly sealed with the Apostille of the Hague Convention • Apply for NIE number • Postal address in Spain • Complete description of the company objects-activities • Power of attorney for the incorporation if required • Draft Deed of incorporation • Apply to the tax office for the CIF number of the new company • Registration in Registro Mercantil • Must keep books of account under Spanish regulations & IFRS • Must file for value added and corporation taxes
Subsidiary A new Spanish entity formed to be a direct subsidiary of the holding overseas company with trading/business activities in Spain: Some of the basic requirements are: • Opening of bank account and deposit of the initial share capital (minimum 3000 Euros) • Decide on the method of administration, management and percentage participation of shareholders • Obtain a NIE number for all individual shareholders and directors, and a CIF for corporate shareholders • Decide on where the registered office will be • Decide on the company objects / activities • All directors have to be present at the setting up meeting with the Notary, or represented by way of a power of attorney • Approve the standard draft of Articles of Association produced by the Notary and execution of the public deed of incorporation before the said Spanish Notary Public
Subsidiary - Details/ Legal Documents • Certificate of clearance of the corporate name issued by Registro Mercantil • Original bank certificate for the initial capital deposited. • Personal details of all shareholders and directors and copies of their passports legalized by Notary Public and duly sealed with the Apostille of the Hague Convention. • Power of attorney to represent the Holding company in dealings with the Spanish Tax Office. •
Subsidiary - Details/ Legal Documents • Copy of the Holding company Administrator- President’s passport legalized by Notary Public and duly sealed with the Apostille of the Hague Convention. • Notarized copy of the Incorporation Deed (Memorandum and Articles) and Companies’ Register Certificate of the relative incorporation of the Holding company legalized by Notary Public and duly sealed with the Apostille of the Hague Convention. • Address in Spain. • Complete description of the company objects-activities. • Power of attorney for the incorporation
Recommend
More recommend
