Employment income (rendimientos del trabajo) covers all monetary and in-kind remuneration arising from an employment or statutory relationship, governed by Articles 14 to 21 of the Spanish Personal Income Tax Act (LIRPF, Law 35/2006). It is included in the general tax base and taxed at progressive IRPF rates after deducting specified costs including the standard EUR 2,000 deduction and social security contributions. Under the special impatriate regime (Art. 93 LIRPF), Spanish-source employment income is taxed at a flat 24 per cent rate up to EUR 600,000 per year.
In practice
What Is Employment Income in Spain
Employment income encompasses all remuneration a person receives for working under the direction of another party. Articles 14 to 21 of Law 35/2006 (LIRPF) define and regulate it in detail.
Employment income includes, among other items:
- Salaries and wages
- Unemployment and retirement benefits
- Severance payments, except the exempt portion under Art. 7.e LIRPF
- Benefits in kind (company car, insurance, stock options)
- Per diems and travel allowances that exceed the regulatory thresholds
Deductible Costs
The net employment income is calculated by deducting from the gross income:
- Social security contributions and mandatory mutual society payments
- Trade union and professional association fees (within limits)
- Standard employment income deduction: EUR 2,000 per year as a general rule, increased for low-income taxpayers or those with geographic mobility
Withholding Tax
Employers and public administrations must withhold tax on account of IRPF at the applicable rate for each employee, determined by their personal and family circumstances. The excess or shortfall in withholding is settled in the annual tax return (Form 100 or Form 151).
Employment Income Under the Impatriate Regime
Taxpayers who have opted for the special regime under Article 93 LIRPF pay a flat rate of 24 per cent on Spanish-source employment income up to EUR 600,000 per year, and 47 per cent on the excess. Foreign-source employment income is exempt unless earned through a permanent establishment in Spain.