Running payroll in Spain

Processing payroll in Spain can present challenges for foreign employers due to the country’s unique regulatory and taxation environment. A key factor in the complexity of payroll in Spain is the significant influence of collective bargaining agreements, which can directly impact payroll processes. Additionally, the distinction between resident and non-resident employees in terms of taxation adds another layer of complexity.

Navigating Spain's labor laws, social security contributions, and compliance requirements can be intricate, requiring careful attention to ensure accurate and timely payroll processing. This guide will walk you through the essential aspects of payroll in Spain, providing you with the knowledge to manage your payroll operations efficiently and in compliance with local laws.

Before commencing operations, companies must register with the Spanish Tax Agency (Agencia Tributaria) to obtain a company tax identification number (Número de Identificación Fiscal or NIF). This number is essential for tax-related activities, including payroll processing and withholding income tax from employee salaries.

Subsequently, employers must register with the General Treasury of Social SecuritySocial Security Authority (Tesorería General de la Seguridad Social) to obtain a Contribution Account Code (Código de Cuenta de Cotización or CCC). This code is necessary for enrolling employees in the social security system.

Employers further have to take out occupational accident insurance for their employees. New hires must be reported to the Spanish social security authorities through an electronic hiring declaration.

Even if employees are hired under a foreign entity, the employer must register with the Spanish Tax Agency and Social Security Authority. This registration is mandatory to fulfill withholding and payment obligations related to income tax and social security contributions.

While it is common practice for employers to have a local Spanish bank account to facilitate payments to local tax and social security authorities, it is not strictly mandatory.

Spain's income tax system operates on both national and regional levels. However, these rates are combined into a single progressive tax rate for payroll calculations. Tax regulations differ between residents and non-residents. Social security contributions are shared between employees and employers.

Tax Considerations

Spanish income tax is categorized into two systems:

• Residents: Taxed on worldwide income.​

• Non-residents: Taxed only on income sourced within Spain.​

Tax residency is determined by meeting any of the following criteria:

• Spending more than 183 days in Spain within a calendar year.​

• Having economic interests or a primary professional activity in Spain.

Residents are subject to progressive tax rates ranging from 19% to 47%, varying by region. Employees must provide their personal tax information to employers using Form 145 for accurate tax withholding.

The taxable base includes total remuneration, such as salaries, allowances, bonuses, and benefits. Deductions are available for social security contributions and certain employment-related expenses.

For the 2025 tax year, the personal tax allowance is €5,550, with additional allowances for family circumstances and other specific situations. These allowances may vary depending on the region and specific personal or family situation.

Non-residents are taxed at a flat rate of 24%, or 19% if they reside in another EU member state, Iceland, or Norway.

Tax Withholding and Reporting

Employers in Spain are mandated to withhold income tax (IRPF) from employee wages and salaries and remit these amounts to the Agencia Estatal de la Administración Tributaria (AEAT), the national tax authority. Regional taxes are administered by local authorities, and rates may vary depending on the autonomous community.

Income tax withholdings must be deducted monthly. The frequency of remittance to the tax authorities depends on the company's annual turnover:​

• Monthly remittance: Required if the company's annual turnover exceeds €6,010,121.04. Payments are due by the 20th of the following month.​

• Quarterly remittance: Applicable to companies with turnover below the threshold. Payments are due by the 20th of April, July, October, and January, covering the previous quarter.

Employers must file a tax declaration each quarter or month, reporting total payments made to employees and the corresponding income tax withheld. The appropriate forms are:​

• Form 111: For reporting withholdings from resident employees.​

• Form 216: For reporting withholdings from non-resident employees.

Both forms are to be submitted electronically. The annual summaries, Form 190 (resident employees) and Form 296 (non-resident employees), are due by January 31 of the following year.

Employees whose annual income exceeds €22,000 from a single employer are generally required to file an individual tax return. This threshold may be lower if income is derived from multiple sources. Employers provide an annual income tax certificate to employees, detailing the total tax withheld during the year. The tax return filing period is typically between April 2 and June 30 of the following year. The tax year aligns with the calendar year, running from January 1 to December 31.

Social Security Contributions

Employers in Spain are responsible for withholding social security contributions from their employees' monthly salaries and making their own contributions. As of 2025, the employer's share of social security contributions is approximately 30.57%, covering general social security funds, unemployment insurance, the wage guarantee fund, and vocational training. Employees contribute 6.48% of their wages to social security.

The contribution base is the employee's gross pay, including all cash payments and benefits in kind. Social security contributions apply to income exceeding €1,323, with a higher minimum threshold possible depending on the employee's position and job category. No contributions are due on income exceeding €4,909.50 per month, the maximum contribution base for 2025.

Effective January 1, 2025, an additional "solidarity contribution" applies to income exceeding the maximum contribution base. This progressive contribution does not generate additional pension rights and is only applicable to employed individuals. The contribution rates are:

• Up to 10% above the maximum base: 0.92%

• 10% to 50% above the maximum base: 1.00%​

• Above 50% over the maximum base: 1.17%​

Payments to the Social Security Treasury must be made no later than the last day of the following month. The official platform for administering social security contributions is SILTRA.

Occupational accident insurance premiums are paid separately, with rates varying depending on the employee's occupation. Companies may also establish additional pension plans for their employees. If they choose to do so, they must file an annual declaration with the tax authorities by January 31 for the previous year.

Employees in Spain are entitled to various benefits. These include:

• Annual leave and public holidays: 30 calendar days (i.e. 22 business days), plus 14 public holidays

• Maternity leave: 16 weeks of paid maternity leave, extendable by 2 weeks per child in case of multiple births 

• Paternity leave: 16 weeks of paid paternity leave, aligning with maternity leave provisions

• Parental leave: unpaid leave until the child turns 3

• Sick leave: 3 days unpaid (common practice for employers to provide pay); sick days 4 to 15 paid at a rate of 60% by the employer; thereafter, sickness benefits equal to 60% of employee’s salary are provided by Social Security; after 20 days, sick pay rises to 75%

For more information on employee benefits and other employment requirements in Spain (including severance pay and termination procedures), check out our Global Hiring Guide.

​As of January 1, 2025, Spain's Minimum Interprofessional Wage (SMI) increased by €50 to €1,184 per month, distributed over 14 payments annually, resulting in an annual gross salary of €16,576. Overtime is generally compensated with time off in lieu rather than monetary payments, unless otherwise specified in the applicable collective bargaining agreement. Additionally, most employees are entitled to 14 salary payments per year, including a 13th and 14th month salary, which are typically paid in December and July respectively.

​In Spain, payroll is typically processed on a monthly basis, with employee payments commonly issued between the 25th of the current month and the 5th of the following month. All payments must be made in Euros, the official currency. Salary payments can be made from a foreign bank account.

Employers are required to provide employees with payslips for each pay period, which can be delivered in either paper or electronic format. These payslips should include comprehensive details such as:

• Total remuneration payable, including the number of paid working days and net salary.,

• Deductions for social security and taxes, along with the employer's social security contributions,

• Employee's personal information, including name, address, tax identification number, social security number, and job details, and

• Employer's information, including company name, address, tax identification number, and social security contribution account code.​

Employers are mandated to retain payroll records for a minimum of four years to comply with legal requirements.