Businesses and self-employed individuals who hire people are required to withhold or pay their employees based on their income.
A person who works in Spain is typically regarded as a tax resident and is consequently liable for personal income tax. Payers are required to pay the withholdings made using Form 111 in these circumstances. Each person’s withholding amount will be different based on their income as well as their unique family and personal circumstances.
What occurs if a worker in Spain is not regarded as a tax resident?
For tax purposes, an employee may be deemed a non-resident for a number of reasons, such as being temporarily employed here, performing occasional work in Spain, or having recently arrived and not yet spent more than 183 days in Spanish territory in a single calendar year.
The employee will be liable to Non-Resident Income Tax (IRNR) rather than Personal Income Tax (IRPF) if any of these conditions are satisfied and they are deemed to be non-resident for tax reasons. In this instance, the withholdings made using Form 216 must be paid by the employer.
Withholding is applied at a rate of 24%, with the exception of IRNR taxpayers who have their tax residence in Iceland, Norway, or another EU member state, in which case the withholding is 19%. The existence of a Double Taxation Avoidance Agreement, which sets a different proportion for this kind of income, is unaffected by this.
It is crucial to understand that a European Union citizen who has been in Spain for more than 183 days in a single calendar year automatically obtains the status of a tax resident, with all the benefits that come with it, at the time that a «Certificate of registration as a citizen of the European Union» (“Certificado de registro de ciudadano de la Union Europea”) is obtained. This eliminates the need for the Spanish Tax Agency to consider the taxpayer as a tax resident.
Specialties for which a natural person must use Form 216 to withhold
The following are other justifications for which a taxpayer’s withholding must be paid under Model 216 without the taxpayer’s consideration of the Tax on the Income of Non Residents:
Employees who are not Non-Resident Income Tax taxpayers but who will become so due to their relocation to another nation when it is anticipated that they will remain there for more than 183 days must submit Form 247 in advance. May, without having to be in it, request the withholding in accordance with the regulations applicable to non-residents (IRNR) for the year in which it is anticipated that they will acquire this condition within the same calendar year from the start of the employment in the other country.
In order to do this, the interested party must submit Form 247, which details the travel overseas, together with a certificate from the employer attesting to the completion of the essential prerequisites.
Once this form has been filed, if it is done correctly, a certificate must be received, within 10 days at the taxpayer’s address, from the Tax Agency, which must be provided to the employer, stating that from the moment the certificate is issued, withholdings must be made from the employee.
Beckham Law
With certain exceptions, taxpayers who use the special tax regime for employees posted to Spanish territory under Article 93 of the Personal Income Tax Law (also known as the «Beckham Law«) may choose to be taxed under the Non-Resident Income Tax while still being considered Personal Income Tax taxpayers.
A certificate detailing the years in which you will be eligible to benefit from this special regime will be sent to the interested party’s address by the Tax Agency upon acceptance of the application. This certificate must be given to the employer in order for them to apply the withholdings in accordance with the non-resident regulations, and it must also be completed using Form 216.
You can read our article on the most important aspects about tax residence here:
Understanding tax residency in Spain: A Complete guide for foreigners – Barcelona Global Service
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