EMPLOYER ALERT: SPAIN LEGISLATION CHANGE WILL IMPACT EMPLOYEE TAXES

AUGUST 1 2015– Celergo would like to update you regarding a tax change in Spain that has an impact on your employees’ payroll. The Spanish Government has decided to implement a process of income tax percentage decrease. The reform was published in the Official State Bulletin (BOE) on 11th of July 2015. Celergo’s understanding is that through this change, the authorities’ intention is to anticipate the taxation decrease scheduled for 2016. As mentioned, this reform will have an impact on payroll. Please note that not all the employees will see a decrease in their tax rate. The new rate is dependent upon several factors (i.e. special tax office tables, gross salary, family situation, disability, etc.).

Since the annual rate cannot be re-calculated by installments, the Royal Decree 9/2015 proposes the following measure: to regularize the percentage based on the average of both situations, before and after the change. An example, in most cases, in January the percentage applied was 20% and it is supposed to decrease by 19%, the rate to be applied going forward for 2015 will be 19.50%.

Please note the following:
1. When is this change effective?
• The new rate will be applied automatically by your Provider’s software effective August 1 for those employees that meet the criteria.
2. Do employers need to inform the employees about this?
• The legislation does not state anything specific. Spanish media has given wide publicity to these changes. However, the employer can share a part of our notification with employees, when distributing August pay-slips, to prevent possible questions.
3. The proposal is to regularize based on the average between old and new, are there any other options?
• In fact, it has been presented as a suggestion by the tax office, but it is the only possible way to manage this.

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