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  • Writer's pictureCaamaño Asesores

The adjustment of IRPF in your monthly salary

Is it possible that, at a certain point in time during the year, your net monthly salary is lower than in previouos months?

Yes, it can happen that, at a certain point in time during the year, your net salary is lower than in previous months. This is due to the fact that, under certain conditions (usually, as year-end approaches), it is obligatory for your employer to adjust the amount of withholding personal income tax (Impuesto sobre la Renta de las Persona Físicas or IRPF) in your payroll slip and, as a consequence, your net salary payment will be reduced.

The employer's obligation to withhold IRPF

Apart from the Social Security contribution, one of the deductions that are included in the payroll slip is the personal income tax withheld. The employer has the obligation to withhold IRPF according to percentages based on the annual salary, the type of contract and the personal circumstances of the employee.

The adjustment of the IRPF

Employers have the obligation to adjust the tax situation of the workers based on the total amount of their annual compensation. This adjustment of the percentage of withholding tax could be due to:

  1. The change of the type of contract: In temporary contracts for less than a year, the law allows the application of a minimum rate of 2%. If, for example, a 6 month contract is converted into a fixed contract later on, the percentage of withholding tax will need to be adjusted, taking into consideration the level of income and personal circumstances of the worker.

  2. The increase of the annual compensation initially estimated: If the company estimates that the worker is going to make 22,000 € per year and he finally makes 25,000 € (due to a salary increase, overtime, bonuses, etc.), an adjustment of the withholding tax will need to be made. Therefore, the increase of the estimated income implies and increase of the tax to withhold.

Is it possible to negotiate the IRPF percentage?

We cannot force our employer to not withhold IRPF or to decrease the percentage of withholding below what's legally obligatory since it is a prepayment to the Tax Agency of the worker's personal income tax. However, when your personal circumstances change, you can request the change of your withholding tax percentage. For example, if you have a baby during the year, if you take care of your parents over 65 years of age or if you can prove a disability of more that 33%.

When your personal or family circumstances change, you must inform to your employer through the tax form Modelo 145, which will provide all the necessary information for the recalculation of the withholding tax. Additionally, you can always ask your employer to increase your withholding tax rate (e.g., if you have worked for another company during the year of if you have had more than one payer).

To request an increase of your withholding tax percentage, you should do it in writing (some companies have specific forms for this purpose).

How can I calculate my IRPF percentage?

The calculation of the withholding tax can be done manually but it's a complex task. The best way to do it is to make use of the calculator available at the Tax Agengy's website (calculadora de tipos de retención de IRPF).

The tax withheld is a prepayment of your personal income tax

It's important to keep in mind that the tax withheld is a prepayment of your personal income tax. In other words, your are not going to pay more or less at the end of the year. Whatever you don't prepay now, you will have to pay later and, in the event that you are entitled to it, the Tax Agency will reimburse you for any excess tax withheld. So, once you file your personal income tax declaration (usually, between April and June of each year), you will be able to confirm if you have prepaid in excess (in which case you will be reimbursed) or less than necessary (in which case you will have to pay the difference).

In any case, it is important to remember that the tax rates may change from one year to the next, depending on the tax policy applied by the Government in office. Likewise, your tax bill may vary for any given salary level or personal circumstances. This is somethign that we shouldn't forget at the moment of exercising our right to vote...


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