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V0029-21 15 January 2021 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · retención

Retention rate in temporary contracts may increase via regularization mechanism

A worker on temporary contracts under one year questions why a retention rate above 2% is applied. The DGT explains that when renewals or new hires occur, companies must regularize the retention rate based on total expected income.

The question raised

Tax consideration in this regard.

The DGT's ruling

In contracts with a duration of less than one year, the minimum withholding rate is 2%. However, if the worker continues to provide services or does so again within the same calendar year, the company must regularize the withholding rate. This regularization is calculated by considering both the remuneration already received and the foreseeable remuneration, which may result in a percentage higher than 2% if the volume of income increases. The new rate resulting from the regularization will remain at 2% only if the new contract is also for a duration of less than one year.

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