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Hiring in Spain

Spain, formally known as the Kingdom of Spain, is a country in Southwestern Europe. Madrid is the capital and the largest city of Spain. Spanish is the official language and Euro is the official currency. Automotive industry is one of the largest employers in Spain. Textiles, Renewable energy, technology, petroleum and construction are some important manufacturing industries. Spain’s main trading partners are Germany, Portugal, Italy, France, UK, China and US. Global PEO or Employer of Record (EOR) play a pivotal role in providing companies with services related to hiring employees, and ensuring compliance with Spain’s legal and tax regulations. Labor Code stipulates that employees are entitled to 30 days of annual leave. Residents are taxed on their worldwide income; non-residents are taxed on their Spanish source income. Global PEO’s or Employer of Record (EOR) facilitate companies by ensuring compliance with Spain’s Labor Code and tax laws.

statutory labor requirements

Probation Period

  • As a general rule and in the absence of any provision in the collective labor agreement, the probationary periods cannot exceed:
    • Six months for college and junior college graduate specialists.
    • Two months for all other employees.
    • At companies with fewer than twenty-five employees, the trial period for employees who are not college or junior college graduate specialists cannot exceed three months.
    • One month in the case of temporary fixed-term employment contracts which are less than six months. 
    • Moreover, training contracts, indefinite-term employment contract in support of entrepreneurs and special employment contracts (domestic workers, senior managers, among others) have their own specific trial periods.

Annual Leave

  • Each employee has the right to a minimum of one and a half days off per week, which may be accumulated by periods of up to 14 days. 
  • Workers are entitled to a minimum vacation period of 30 days, which cannot be paid in lieu.
  • Employees are entitled to a minimum of thirty (30) days of paid vacation per year, which may differ by contract or collective agreement.

Public Holidays

  • The Spanish government determines each year the valid holidays
  • Each municipality can determine up to 14 holidays
  • The following public holidays were set for 2020
    1. New Year’s Day (1st January)
    2. Good Friday (10th April)
    3. Easter Sunday (12th April)
    4. Labor Day (1st May)
    5. Assumption of Mary (15th August)
    6. Fiesta Nacional de España (12th October)
    7. All Saints Day (1st November)
    8. Constitution Day (6th December)
    9. Christmas Day (25th December)

Maternity Leave

  • Female employees who are pregnant are entitled to 16 weeks paid maternity leave. 
  • The mother must take six (6) of these full-time weeks right after birth. 
  • The remaining ten (10) can be exchanged for twenty (20) weeks of part time work if the employee reaches an agreement with the employer.

Paternity Leave

  • As of 1 April 2019, paternity leave in Spain has been extended from five to eight weeks. 
  • This was settled in a Royal Decree-Law to guarantee equal treatment and opportunities. 
  • Fathers of children (born and adopted) are entitled to nearly two months leave, of which the first two should be taken at the same time as the mother and immediately after the birth or adoption.

Sick Leave

  • There are no standard sick days. 
  • Employees who have fallen ill or have suffered an accident can have their employment contract suspended during for up to 18 months. 
  • The employer normally pays the worker this temporary sick pay, and is then reimbursed by the Social Security department. 
  • Under Spain's labor law, when a worker is temporarily unable to work and in need of medical assistance due to illness or accident, he/she will be paid at least 60 percent of his/her wages.

Work Hours

  • A typical Spanish working day tends to be from around 8.30am or 9am to around 1.30 pm and then from 4.30pm or 5pm to around 8pm.
  • The famous siesta, whilst declining in the larger cities, is still a major part of the working day in Spain. 
  • Siesta is a mid-afternoon break, usually around three hours, which gives employees a break from work during the intense midday heat.
  • In Spain an employee can only be asked to work a maximum of 40 hours per week (calculated annually), and no more than 9 hours per day.

Overtime

  • Workers may work a maximum of 80 hours’ overtime per year, which does not include overtime compensated with rest time, or work carried out to prevent or repair extraordinary and urgent damage. 
  • The latter is obligatory for the worker and must be paid as overtime.

Notice Period

  • The employee must give a notice period for the termination of the agreement according to the collective agreement. 
  • Normally 1 month for managers/directors and 15 days for technical employees. 
  • The employer never gives a notice period and can terminate the agreement at any time, but it is compulsory to give compensation to the employee.

Severance

  • In the event of dismissal for an objective reason (i.e. economic reasons, worker's capacity, at the time the written notice of dismissal is delivered to the worker, severance pay shall be simultaneously made available to the worker. 
  • Severance pay amounts to 20 days' wages per year of service with a maximum of 12 months' wages.
  • A worker who is dismissed for disciplinary reasons is not entitled to severance pay.

13th / 14th Month Pay

  • Yes
  • There is no statutory requirement to pay the 13th or 14th month salary.
  • However, it is a wide spread practice to divide the payroll in 14 months, where employees will receive double pay in July or August and double pay in December.
  • After the economic crash, the government removed the 13th month payment for government employees.
  • There is no evidence that the private sector did the same.

income tax

  • The Spanish system for direct taxation of individuals is mainly comprised of two personal income taxes: Spanish personal income tax (PIT), for individuals who are resident in Spain for tax purposes, and Spanish non-residents' income tax (NRIT), for individuals who are not resident in Spain for tax purposes who obtain income in Spain. Therefore, persons who obtain income in Spain are either liable to pay Spanish PIT or Spanish NRIT.
  • Residents in Spain are generally subject to PIT on their worldwide income, regardless of where it is generated, which is taxed, following statutory reductions, at progressive rates.
  • Non-residents are subject to NRIT only on their Spanish-source income.
  • There are two types of taxable income for Spanish PIT purposes: general taxable income and savings taxable income.
  • Savings taxable income is basically composed of the following:
    • Dividends and other income generated from holding interests in companies.
    • Interest and other income generated from transferring the taxpayer’s own capital to third parties. As an exception, when capital transferred to a related company exceeds three times the latter’s equity, the interest corresponding to the excess is taxed as general taxable income.
    • Income generated from capitalization transactions and life and disability income insurance.
    • Capital gains generated from transfers of assets.
  • General taxable income includes:
    • All income that is not savings taxable income.
    • Capital gains not generated from transfers of assets (such as lottery prizes).
    • Income allocations, attributions, or imputations, as established by law.

Interest and other income generated from transferring the taxpayer’s own capital to a related company when the capital exceeds three times the latter’s equity and for the part corresponding to the excess.

Personal Income Tax Rates

  • Savings taxable income is taxed at the following rates:
    • 19% for the first EUR 6,000 of taxable income.
    • 21% for the following EUR 6,000 to EUR 50,000 of taxable income.
    • 23% for any amounts over EUR 50,000.
  • For general taxable income, progressive tax rates are applied (which are the sum of the applicable rate approved by the state and the applicable rate approved by each autonomous community of Spain in their progressive tax rate scales). Tax liability may therefore differ from one autonomous community to another.
  • The following tables show the tax scale for withholdings approved by the state. This scale can be used as a guideline of the progressive tax rates applicable for the general taxable base. For the reasons stated above, the scale applicable in the corresponding autonomous community of Spain should always be consulted to calculate the total progressive tax rate.

Taxable base

(up to EUR)

Tax liability (EUR)

Excess of taxable base

(up to EUR)

Tax rate (%)

0

0

12,450

19

12,450

2,365.5

7,750

24

20,200

4,225.5

15000

30

35,200

8,725.5

24,800

37

60,000

17,901.5

Remainder

45


Non-resident income tax (NRIT) rates

  • For non-residents, income obtained without a PE is taxed at the following rates:
    • General rate: 24%. For residents in other EU member states or European Economic Area (EEA) countries with which there is an effective exchange of tax information, the rate is 19%.
    • Capital gains generated from transfers of assets: 19%.
    • Interest: 19%. Interest is tax exempt for EU residents. Double taxation treaties (DTTs) normally establish lower rates.
    • Dividends: 19% (DTTs normally establish lower rates).
    • Royalties: 24% (DTTs normally establish lower rates).
    • Pensions are taxed at progressive rates (between 8% and 40%).

deductible expenses

Employment expenses

  • The following, amongst others, can be deducted from gross employment income for PIT purposes:
    • Social security contributions (employee contributions).
    • Mandatory contributions to mutual benefit societies, providing for widows/widowers and orphans upon the death of the participant.
    • Dues to unions and compulsory contributions to professional colleges, up to a maximum of EUR 500.
    • Legal defense expenses, up to a maximum of EUR 300.
    • 'Other expenses' deduction of EUR 2,000. This deduction is higher for workers who accept a work post in another town/city or for disabled workers.

Business expenses

  • Tax amortization of goodwill is deductible up to an annual rate of 5%, provided that certain requirements are met.
  • Tax amortization of other intangible assets whose useful life may not be reliably estimated is deductible up to an annual rate of 5% if certain requirements are met.
  • Supply expenses (water, electricity, gas, telephone, Internet) are partially tax deductible when taxpayers partially use their habitual residence to carry on a business activity. The deduction is 30% of the expenses in proportion to the square metres of the home used for the activity with respect to its total area, unless the taxpayer can prove any other proportion.
  • Health insurance premiums paid by the self-employed person are deductible in the part corresponding to their own coverage and that of their spouse and children under 25 who live with them. The maximum deduction limit will be EUR 500 for each of the persons indicated above or EUR 1,500 for each of them with a disability.
  • Gross business income generated over a period of more than two years or that is evidently irregular income in accordance with the regulations implemented under Spanish PIT law, when recorded in a single tax period, qualifies for a 30% reduction with certain limits and requirements. The amount on which the 30% reduction can be applied should not exceed EUR 300,000.
  • Net business income is reduced by EUR 2,000.
  • In addition, net business income is reduced by:
    • EUR 3,700 for taxpayers whose business income is EUR 11,250 or less.
    • EUR 3,700 - (1.15625 x [business income - EUR 11,250]) for taxpayers whose business income is between EUR 11,250 and EUR 14,450.

Reductions to net taxable income

  • Alimony paid to an ex-spouse in accordance with a court decision is deductible from the taxpayer's PIT taxable income. 
  • Child support is not deductible from taxable income, although the progressive tax scales can be applied separately for this amount if the taxpayer is not entitled to the allowance for relatives in a descending line.
  • The following amounts are deductible from general taxable income:
    • A taxpayer's annual contributions to qualifying pension plans up to a maximum of EUR 8,000 per year. This includes contributions to a pension plan made by the employers on behalf of the staff. The amount may not exceed 30% of total individual net income from employment and business activities.
    • In addition, taxpayers whose spouses do not obtain income from employment or business activities over EUR 8,000 can deduct the contributions made to qualifying pension plans from their own taxable income on behalf of the spouse, up to a maximum of EUR 2,500 per year.

Personal and family allowances

  • In 2020, the following allowances apply:
    • A personal allowance, which is generally EUR 5,550. The allowance is EUR 6,700 when the taxpayer is over 65 years of age and EUR 8,100 when the taxpayer is over 75 years of age. When the taxpayer is disabled, allowance is increased by EUR 3,000 or, if the disabled taxpayer's level of disability is 65% or more, by EUR 9,000. This minimum is increased by EUR 3,000 of care assistance expenses when the taxpayer can justify that one needs the care or has reduced mobility or a disability of at least 65%.
    • A minimum family allowance of:
    • EUR 1,150 for each relative in an ascending line over 65 years of age who forms part of the taxpayer's household and is dependent on the taxpayer and whose annual income does not exceed EUR 8,000. The allowance is EUR 2,550 when the relative is over 75 years of age.
    • EUR 2,400 for the first relative in a descending line who forms part of the taxpayer's household and whose annual income is not over EUR 8,000. For the second, third, and subsequent relatives in a descending line, the allowance is EUR 2,700, EUR 4,000, and EUR 4,500, respectively. The allowance is increased by EUR 2,800 when the relative is under three years of age.
  • A minimum family allowance for disability of relatives in an ascending and descending line of EUR 3,000 for each relative or EUR 9,000 when the level of disability is 65% or more. This minimum is increased by EUR 3,000 of care assistance expenses for each relative that can justify that one needs the care or has reduced mobility or a disability of at least 65%.

Deductible Expenses

Employment Expenses

  • Social security contributions (employee contributions).
  • Mandatory contributions to mutual benefit societies
  • Dues to unions and compulsory contributions to professional colleges, up to a maximum of EUR 500.
  • Legal defense expenses, up to a maximum of EUR 300.
  • 'Other expenses' deduction of EUR 2,000.

Business Expenses

  • Tax amortization of goodwill
  • Tax amortization of other intangible assets whose useful life may not be reliably estimated is deductible up to an annual rate of 5%
  • Supply expenses (water, electricity, gas, telephone, Internet) are partially tax deductible
  • Health insurance premiums paid by the self-employed person are deductible in the part corresponding to their own coverage and that of their spouse and children under 25 who live with them
  • Gross business income generated over a period of more than two years or that is evidently irregular income in accordance with the regulations implemented under Spanish PIT law, when recorded in a single tax period, qualifies for a 30% reduction with certain limits and requirements
  • Net business income is reduced by EUR 2,000.

Reduction to net taxable income

  • Alimony paid to an ex-spouse in accordance with a court decision is deductible from the taxpayer's PIT taxable income. 
  • A taxpayer's annual contributions to qualifying pension plans up to a maximum of EUR 8,000 per year
  • Taxpayers whose spouses do not obtain income from employment or business activities over EUR 8,000 can deduct the contributions made to qualifying pension plans from their own taxable income on behalf of the spouse, up to a maximum of EUR 2,500 per year.

Personal and family allowance

  • A personal allowance, which is generally EUR 5,550.
  • A minimum family allowance of EUR 1,150 for each relative in an ascending line over 65 years of age who forms part of the taxpayer's household and is dependent on the taxpayer and whose annual income does not exceed EUR 8,000.
  • A minimum family allowance of EUR 2,550 when the relative is over 75 years of age.
  • A minimum family allowance for disability of relatives in an ascending and descending line of EUR 3,000 for each relative or EUR 9,000 when the level of disability is 65% or more.

 immigration 

  • Workers who are not from EU countries need to obtain a Work Visa to be able to live and work in Spain. Without a Work Visa a company cannot legally employ non-EU citizens.
  • To work in Spain as a highly-qualified worker, you must obtain:
    • a work and residence permit; and
    • work and residence visa.
  • There are various types of Work Visas for Spain for different types of jobs and for different lengths of employment. 
  • Some of the most common types of work visas are:
    • Long-term Work Visas
    • Seasonal Work Visas
    • EU Blue Card
  • Long term Visa for highly skilled workers
    • Unless you’re a citizen of the EU/EEA or Switzerland you’ll need a longer-term national visa (visado nacionale) if you intend to live, work, study or carry out research in Spain for longer than three months.
    • To work in Spain as a highly-skilled employee, non-EU citizens need to find a job which is listed as a ‘Shortage Occupation’. This is a job for which there is a lack of suitable candidates within the EU. The employer must then request a Work Visa from the Ministry of Labor.
  • Seasonal Workers
    • The process of obtaining a Work Visa for Seasonal Workers is similar to the process for highly-skilled workers. 
    • Employers need to apply for the visa on the worker’s behalf from the Ministry of Labor.
    • In addition to this process, seasonal workers need to demonstrate they have suitable accommodation arranged, their travel costs are covered, and that they will return to their country once the job has finished. 
    • The visas are valid for the duration of the work contract.
  • EU Blue Card
    • The EU Blue Card is for people who spent at least 3 years completing a higher education qualification which allows them to work as a skilled professional.
    • People who have a minimum of 5 years’ professional experience at a high level are also eligible.
    • The gross annual salary resulting from the monthly or annual salary specified in the work contract or binding job offer must be equal to or higher than the relevant salary threshold defined by the Member State (at least 1.5 times the average gross annual salary in the Member State concerned).
    • For 2015, Spain set the minimum salary threshold at: 33 908 EUR.

Type of Visa

Documentation

Validity

Eligibility

Long term Visa for highly skilled workers

  • Foreign identification card
  • ID photo (passport type)
  • Passport (original) and a copy
  • Document proving that you have sufficient funds.
  • Applicant’s resume (CV).
  • An advanced degree from a prestigious university or prestigious school,

1 year (renewable)

  • To work in Spain as a highly-skilled employee, non-EU citizens need to find a job which is listed as a ‘Shortage Occupation’.
  • This is a job for which there is a lack of suitable candidates within the EU. 
  • The employer must then request a Work Visa from the Ministry of Labor.

Seasonal Work Visa

  • A certified copy of your employment contract
  • A valid passport with at least four months left to run
  • A clean criminal record statement covering the past five years
  • A medical certificate
  • Suitable accommodation
  • Proof of finances

Duration of the work contract

  • Employees applying for short term or temporary work in Spain

EU Blue Card

  • Bachelor or Master’s Degree
  • Valid Passport
  • Application Form
  • Proof of Health Insurance

1 year (renewable)

  • A valid work contract or binding job offer of at least one year.
  • The EU Blue Card applicant must have successfully completed a post-secondary higher education program of at least three years: a Bachelor or Master degree
  • For 2015, Spain set the minimum salary threshold at: 33 908 EUR.

value added tax

  • Spanish VAT is payable on supplies of goods and services carried out in Spanish VAT territory and on imports/intra-EU acquisitions of goods and services. There are three rates for the different types of goods and services, which are as follows:
  • Ordinary rate of 21%, applied on regular supplies of goods and services.
  • Reduced rate of 10%, applied on basic necessities (e.g. food and agricultural products not included in the ‘super reduced’ 4% rate, dwellings, other qualifying services). Live cultural events and cinema tickets are taxed at the reduced rate of 10% too. 
  • Super reduced rate of 4%, applied on basic necessities other than those classified under the reduced rate (e.g. bread, milk, books, medicine).
  • In the Canary Islands, a specific tax is applied instead of VAT, called the Canary Island General Indirect Tax (IGIC). The ordinary IGIC rate is 7%, and the other IGIC rates are 0%, 3%, 9.5%, and 15% (20% for tobacco). IGIC is similar to VAT, with some significant differences, such as the tax exemption established for telecommunications services. Imports of tangible goods into the Canary Islands are subject to this tax.
  • In Ceuta and Melilla, sales tax is applied instead of VAT.

VAT Rates

Ordinary Rate

21%

Reduced Rate

10% 

Super Reduced Rate

4%

withholding tax

  • Dividends paid to a nonresident are subject to a 19% withholding tax, unless a lower rate applies under a tax treaty or the dividends qualify for an exemption under the EU parent-subsidiary directive.
  • Interest paid to a nonresident is subject to a 19% WHT, unless the rate is reduced by a tax treaty or the interest is paid to an EU resident, in which case it is exempt
  • Royalties paid to a nonresident are subject to a 24% WHT (19% if the recipient is resident in the EU or the EEA if the country of residence of the recipient exchanges tax information with Spain), unless the rate is reduced by a tax treaty or the royalties qualify for an exemption under the EU interest and royalties’ directive
  • The WHT rate on technical service fees paid to a nonresident for service fees paid to a nonresident for services related to business activities in the Spanish territory is 24% (19% if the resident is in the EU or the EEA)

Payment/ Income

WHT

Dividends

Dividends paid to a nonresident are subject to a 19% withholding tax

Interest

Interest paid to a nonresident is subject to a 19% WHT

Royalties

Royalties paid to a nonresident are subject to a 24% WHT (19% if the recipient is resident in the EU or the EEA if the country of residence of the recipient exchanges tax information with Spain)

Technical Service Fee

The WHT rate on technical service fees paid to a nonresident for service fees paid to a nonresident for services related to business activities in the Spanish territory is 24% (19% if the resident is in the EU or the EEA)

 termination

  • The employment relationship can be terminated for various reasons. 
  • Such reasons include, but are not limited to, mutual agreement of the parties; reasons validly established in the contract, to the extent permitted by the law; resignation; retirement; death or disability of the employee or employer; force majeure; dismissal; and constructive dismissal
  • Once any trial period has expired, ordinary employees may only be dismissed with cause (during the trial period, the contract may generally be terminated by either party freely). 
  • The basic causes for termination can be grouped into disciplinary causes and “objective” causes
  • Disciplinary dismissals may be based on grounds such as repeated and unjustified lack of punctuality or attendance at work; lack of discipline or disobedience at work; breach of good faith and abuse of confidence in performing the job; or harassment of the employer or of any person who works at the company by reason of any of the protected grounds.
  • “Objective” dismissals are dismissals that do not have to do with the employee’s (“subjective”) misconduct and that are instead based on employee incompetence, employees’ absence from work.

statutory benefits

  • These are mandatory benefits as prescribed by law
  • Statutory benefits include sick leave, maternity leave, paternity leave, notice period, 13th pay, annual leave, public holiday and severance pay
  • It also includes social security benefits such as healthcare (plus sickness and maternity), industrial injuries, unemployment insurance, old age (pensions), invalidity and death benefits. 

 

Statutory Benefits

Social Security Benefits

13th pay

14th month pay

Annual leave

Public holidays

severance Pay

Notice period

Sick leave

Maternity leave

Paternity leave

payments and invoicing

  • The due date for filing the tax return and making a payment for tax residents and individuals taxed under the special expatriate regime is normally from 6 April to 30 June of each year for the income obtained in the previous year.
  • There is no possibility of claiming for filing extensions, hence, if the tax return is not filed on time, penalties will be imposed. These penalties will vary depending on whether the tax return is filed after the deadline on a voluntary basis or whether it is as a result of a tax inspection

 ease of doing business

  • The ease of doing business index is an index created by Simeon Djankov, an economist at the Central and Eastern Europe sector of the World Bank Group.
  • Higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights.
  • According to the World Bank Spain ranked 30th in the World in 2019 in terms of ease of doing business.

employee accruals

   
Christmas Bonus%

*Bonuses vary but must included even if the employer is in financial hardship.

Christmas Bonus Over Vacations %

0%

Severance per Year %

Based on one year of service (20 days a year)
5.49%

Vacations % Employees are entitled to an annual holiday of 30 days (8.24% of annual salary)
Notice %

Employees are entitled to 15 days of notice after one year of service (4.28% of annual salary)

Christmas Bonus Over Notifications% 0%
Vacations Plus%
0%
Total percentage of Salary (yearly)
The total employment accruals as a percentage of salary per anum are equal to 18.01%

employer accruals

Additional information (Country Accruals)

   
Social Security 29.90%
Occupational accidents 1.50%
Maternity  16 weeks
Christmas Bonus 8.33%
Vacations 8.49%
Description Certain persons may be exempt from paying social security contributions, provided that the following requirements are met:1) There is a social security agreement in force between Spain and the person's home country that allows this possibility. 2)The employment relationship with the home country employer is maintained and the person continues to pay social security 3)contributions to one's home country social security system. 4)The person's stay in Spain is limited to a few years (usually between one to five years, depending on the social security 5)agreement in force between Spain and the home country).

 

Employer Accruals Additional information

    Employment Accruals
Annual Leave Employees are entitled to a minimum of thirty (30) days of paid vacation per year, which may differ by contract or collective agreement. This equals 8.22% (30/365 days) of annual income
Maternity Leave Female employees who are pregnant are entitled to 16 weeks paid maternity leave. This equals 30.76% (16/52 weeks) of annual income
Paternity Leave As of 1 April 2019, paternity leave in Spain has been extended from five to eight weeks. This equals 15.4% (8/52 weeks) of annual income
Severance Severance pay amounts to 20 days' wages per year of service with a maximum of 12 months' wages. This equals 5.47% (20/365 days) of annual income
13th Month Pay In Spain 13th month and 14th month bonus pay is mandatory.
In Spain, annual pay is divided into 14 installments; the two additional installments are payable in July and December.
This equals 16.66% (2/12 months) of annual income
Social Security Under the general regime, social security contributions are paid on salaries and wages. In Spain, the minimum monthly base is EUR 1,050.00 and the maximum is EUR 4,070.10 in 2019. The general contribution rates as of January 2019 are 6.35% for employees, depending on the type of contract, and 29.90% for employers, plus a variable rate for occupational accidents (e.g. 1.5% for office work). This equals 29.9% of annual income

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