How To Make Payroll Tax Payments?

Payroll Tax

In this post with updated content, we explain the procedure for calculating workers’ withholdings based on the 2022 tables.

  • In the general case, the calculation of withholdings calls for taking a series of steps that aim to adjust the amount to the worker’s circumstances.
  • There are several special cases in which a fixed rate of retention is applied.

The calculation of workers’ payroll tax withholdings is related to several important procedures. 

In any case, to calculate the withholdings of the workers, it is necessary to know some details and follow certain steps. These are the main aspects that you should take into account.

Latest changes in worker retentions

In 2021, the retentions were updated to include a new section. It affects the highest remuneration, which is withheld at 47% from 300,000 euros. In accordance with this, the maximum rate that can be chosen or applied has also been increased to that percentage.

How to calculate personal income tax withholding: 2022 tables

As in other years, the Tax Agency has made a  summary table with the withholding tables in 2022 available to the public.

The table reflects current regulations and refers not only to income from work but to all types of income subject to withholding.

How to calculate personal income tax withholdings for workers

There are three elements that we must know to calculate the withholdings of workers:

  • The amount that has been paid and for what reason.
  • The retention type.
  • In some cases (such as the general case), the circumstances of the worker.

How withholdings are calculated for workers in the general case

Unless the worker is in any of the special cases, discussed below,  the procedure is based on what is indicated in article 80 and following the Personal Income Tax Regulations. The steps are the following.

  1. Knowledge of the data necessary to calculate the withholdings for workers

In addition to the full amount of the remuneration, we must know the personal circumstances of the worker.

A part of the taxpayer’s income (variable depending on their circumstances) is excluded from the obligation to withhold.

With this, we can take into account certain amounts that are excluded from the obligation to withhold and that are marked. They vary depending on the circumstances of the worker, such as:

  • Your family situation (married, single, widowed, divorced, separated).
  • Spouse’s income.
  • The number of children.
  • The calculation of the withholding base

Once the data is known, we are interested in knowing the basis of the retention. In general, the starting point will be the sum of the fixed and variable remuneration expected to be paid throughout the calendar year. However, they will not include:

  • Company contributions to pension plans.
  • Those made to corporate social security plans.
  • Those made to mutual insurance companies.
  • The arrears.

On the other hand, remuneration in kind is included at its value, without including the amount of the payment on account.

A special assumption is that of laborers or day laborers who are paid by the day. In this case, the amount is calculated by multiplying by 100 that of the daily wage.

From that figure, certain representative amounts will be subtracted  from:

  • Reductions for irregular returns.
  • Reductions for obtaining work income.
  • The €2,000 item for other deductible expenses from earned income.
  • Compensatory pensions to the spouse.

In this post, we tell you what are the withholdings for workers to take into account in 2022.

  1. Personal and family minimum to calculate the type of withholding

Next, you have to make a calculation of the personal and family minimum.  It is done in a very similar way to when the income statement is presented.

Editor’s Note: This article was first published in 2020 and updated to 2021 for relevance.

The most relevant specialties include:

  • The descendants are computed by half unless the worker corresponds to deduct in full for that family member.
  • The limit that the family member cannot have more than 1,800 euros of income to deduct for him will not be taken into account either.
  1. Scale is applied

Once the withholding base is known,  the scale set out in article 85.1 is applied. 1 of the Personal Income Tax Regulations. The same scale is also applied to the personal and family minimum calculated in the previous step. Then the subtraction is done.

The withholding scale is successively applied to the base and to the calculation of the personal and family minimum.

A special case occurs when the worker pays annuities for food in favor of the children by judicial decision without the right to deduct for them. In this type of situation, we will act as follows:

  • First, we apply the scale to the number of compensatory pensions.
  • We will then pass on the remaining amount of the rest of your payments.
  • We will make the sum of the amounts resulting from passing both quantities through the scale.
  • From the sum, we will subtract the amount resulting from applying the scale to your personal and family minimum increased by €1,980.
  1. Maximum retention quota for workers with remuneration of less than €22,000

If the worker earns less than €22,000, the retention fee has certain limits. Specifically, it cannot be more than 43% of the amount by which said remuneration exceeds the minimum excluded from withholding. The amount excluded from withholding depends on your spouse’s marital status, a number of children, and income.

  1. Limitations to the type of withholding

The withholding rate is the one that results from dividing the fee by the withholding base and multiplying the result by 100. It is expressed with two decimals. In certain cases of workers with the right to deduct for investment in habitual residence, it is reduced by two integers.

The retention type is subject to the following  limitations :

  • It can’t be negative.
  • It must always be greater than 2% in the case of contracts of less than one year (0.8% for work carried out in Ceuta or Melilla).
  • It cannot be less than 15% in special employment relationships of a dependent nature (6% for work carried out in Ceuta or Melilla).

The limits applicable to work income derived from special employment relationships of a dependent nature are not applicable if the workers are penalized or disabled.

  1. Cases in which it is appropriate to regularize the type of withholding

It is appropriate  to regularize the type of retention of workers  in situations such as:

  • Continuation of the employment relationship beyond what was planned.
  • Variations during the year of remuneration or deductible expenses from work income.
  • Geographic mobility assumptions.
  • Birth or adoption of a child or increase of other types of descendants.
  • Change in the circumstances of the descendants.
  • The appearance of a disability or increase in its degree in the worker or in his descendants.
  • A judicial resolution that obliges the worker to pay a compensatory pension to his spouse. Or annuities for food in favor of the children.
  • If the spouse obtains income, excluding exempt income, of more than €1,500.
  • Change of residence to the territories (Navarra. Vizcaya, Guipúzcoa, and Álava), Ceuta, or Melilla from the rest of the Spanish territory or from the rest of the territory to the territories, Ceuta or Melilla.
  • A change of residence makes the worker become an IRPF taxpayer.
  • Change in the circumstances of the ascendants.
  • Variations caused by possible rights of the worker to deduct for habitual residence.
  1. New calculation of withholdings for workers in case of regularization

In these cases, according to the new circumstances, the fee is recalculated. Next, the withholdings that have already been made during the year are subtracted. The result is what should be retained for the rest of the year.

Under certain circumstances, it is appropriate to make a regularization of withholdings. This requires calculating how much it would be appropriate to retain in the remainder of the year.

The withholding rate that would be applied in the future would be the quotient between that difference and the total amount of remuneration expected to be paid to the worker in the remainder of the year. Then we will multiply it by one hundred to express it as a percentage.

On the other hand, after regularization, the new withholding rate will not exceed 47%. And, if all the income had been obtained in Ceuta or Melilla and enjoyed the corresponding deduction, the maximum rate after regularization would be 19%.

By aamritri

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