How to calculate income tax withholding

From the moment a company hires a worker, the latter has the obligation to deduct from the payroll the amounts related to the withholdings that have to be made for Income Tax (IRPF) .

The discounted amounts will be taken into account when the worker has to make the Income Tax return, since they are advances that the company enters, on the part of the worker, to the Treasury, and that they can vary the amount to enter or pay in the declaration annual.

In we help you to know how to calculate income tax withholding .

Is the IRPF withholding amount the same for everyone?

The amount that the company retains the worker as income tax is not fixed, and, therefore, varies depending on the circumstances of the worker. To know how to calculate IRPF withholding, we must take into account:

  • Net salary
  • Type of contract
  • Personal circumstances:
    • Age
    • Children in charge
    • Parents in charge
    • Disability or disability of the worker or his dependents
    • Marital status: single, married, divorced, etc.
    • Compensatory pension to be received
    • Payment of alimony to children
    • Payment of the compensatory pension to the ex-spouse
    • Acquisition of habitual residence

How to calculate IRPF retention

To calculate the IRPF withholding to be applied in the payroll, a percentage must be multiplied to the total annual gross income of the worker. This percentage is defined in the law, depends on the salary of each one and ranges from 24% for salaries of up to € 17, 707 gross per year, up to 45% for salaries of more than € 300, 000.

Thus, if a worker (single, without dependent children or other personal circumstances provided by law) charges 17, 000 euros per year, you must multiply this amount by 0.24 to know that your annual IRPF withholding will be € 4, 080. However, this percentage will change if any of the personal circumstances included in the law apply, such as if you have dependent children, are married or bought a home.

The final amount is prorated in each payroll to prevent the worker having to pay the total amount when making the Income statement .

Indicative table to set the IRPF retention percentage:

Annual salary (€)


0 - 17.707


17.707 - 33.007


33.007 - 53.407


53.407 - 120, 000


120, 000 - 175, 000


175, 000 - 300, 000

Four. Five%

More than 300, 000

Four. Five%

As you can give countless situations in the personal circumstances of each worker, which will change this percentage, it is recommended that to calculate the final amount to pay for the retention, consult a lawyer specializing in tax law to offer all specific data.

If personal circumstances change throughout the employment contract, the worker must notify the company as soon as possible, as this can benefit the worker and thus apply a lower percentage of retention. The modification of these circumstances must be done by presenting model 145 to the company, which will be responsible for recalculating the new amount to be retained.

How Income Tax withholding affects the income tax return

According to the withholdings made by IRPF in the payroll of the worker can affect the income statement in different ways:

  • If the deductions made to the worker have a high load, it is possible that the amount overcharged is returned in the income statement.
  • If the withholdings made have a low charge, the worker will probably have to pay the difference when he makes the income tax return.
  • The worker does not have to make the Income declaration if the annual gross salary is less than € 22, 000 or € 11, 200 if he provides services for more than one company.

Remuneration in kind and income on account in the IRPF

When we make the declaration of Income Tax, in the section "retributions" we have to record both the cash, that is, those received in money, as well as the remuneration in kind, that is, goods, rights or services that workers use or consume for free or at a lower price than the market price, according to the definition of the same ones that can be found in the Law on Personal Income Tax.

These rewards in kind involve what is called an income on account, similar to the withholdings that the Treasury practices on the monetary payments we receive on our payroll, that is, a kind of advance payment that we make to the Tax Agency for the salary that We have won and we are deducted from the tax base when it comes time to make the Income statement.

However, in the case of income in kind this can not be done, and therefore they always include an income on account, that is, a payment that the employer must make to the Treasury for the remuneration in kind offered to its employees. . Whether or not the employer affects this income on account in the worker's payroll will depend on the agreement that exists in each company.

If the deposit is passed on, it will appear on the worker's payroll, discounting the gross to be received. If it is not passed on, the amount that appears as the value of the compensation in kind is formed by the value of the object itself plus the deposit, which is added to the gross to be received by the worker.