IRPF Withholding Tax in Spain

What Is IRPF Withholding?

IRPF withholding (retencion de IRPF) is an advance payment of Spanish Personal Income Tax made by the payer (company, self-employed person, or individual) before remitting income to the recipient. The payer retains a portion of the gross amount, remits it to the Tax Agency on the recipient’s behalf, and the recipient, when filing their annual income tax return, counts the amount withheld as tax already paid — reducing or eliminating the balance due at the annual settlement.

Withholding is not an additional tax: it is simply an advance on the IRPF that the recipient would have had to pay in any case. Its function is to ensure a steady flow of revenue to the Tax Agency and to facilitate taxpayer compliance.

Withholding Rates by Income Category (2025)

Employment income (payroll): The percentage is variable and depends on annual gross salary, family situation (number of children, disability, household members), and other personal circumstances of the employee. The payer calculates the applicable rate at the start of each tax year in accordance with the general procedure set out in the IRPF Regulations. Directors and board members are subject to a rate of 35% (25% for companies with turnover below EUR 100,000).

Professional activity income (self-employed):

• Professional activities: general rate of 15% (7% in the first year of activity and the following two years).
• Agricultural, livestock, and forestry activities: variable rates depending on the activity (typically 2%).
• Business activities under simplified direct estimation (modulos) with withholding: 1%.

Capital income — mobiliaria (dividends and interest): General rate of 19%.

Real estate rental income: Rate of 19%. Individuals renting property to companies must include withholding on the invoice; companies renting to individuals do not apply withholding.

Capital gains (prizes, lotteries, transfer of rights): Rate of 19% or the specific rate for each category under applicable regulations.

Payer Obligations: Tax Forms

• Modelo 111: quarterly return (or monthly for large businesses) for withholdings on employment and professional income. Deadline: first 20 calendar days of the month following the quarter.
• Modelo 115: quarterly return for withholdings on urban property rental income.
• Modelo 123: quarterly return for withholdings on investment income (dividends, interest).
• Modelo 190: annual summary of withholdings on employment and professional income (annual equivalent of Modelo 111).
• Modelo 180: annual summary of withholdings on rental income.

Relevance for Businesses

Failure to fulfil withholding obligations generates penalties and late-payment interest: the company must not only pay the unwithheld amounts but may also be fined for a serious tax infringement (50%-150% of the unwithheld liability). A well-configured payroll and invoicing system is the first line of defence against this risk.