Deduction in Spain


A deduction is that amount of money that is subtracted from the total accrued, thus achieving the liquid that a worker receives. In fact, when the appropriate deductions are applied to the total accrued, the gross total remuneration becomes net.

Total accrued - deductions = net remuneration

The following deductions are distinguished:

  • Contribution of the worker to Social Security contributions
  • Personal income tax

1. Contribution of the worker to Social Security contributions

The deductions to be made in the workers' wages are the product of the application of the various rates to the contribution bases. According to the General Social Security Scheme, the rates to apply are:

  1. For common contingencies.
  2. For unemployment.
  3. For Professional Training.
  4. Additional for overtime.

2. Personal income tax

The tax reform approved by the Government introduces important changes that came into force in 2015. These are the main changes in relation to personal income tax deductions:

  • Compensation for dismissal of the worker will continue to be exempt up to 180,000 euros.
  • The rent deduction for tenants is eliminated. As for the owners, the exemption for renting their home remains at 60%; Likewise, those who rent their house to those under 35 years of age will continue to have a 100% reduction.
  • The deduction for the first 1,500 euros collected as dividends disappears; Likewise, the Treasury lowers the savings rates, which fell to a minimum of 19% in 2016. A new tax benefit is also included regarding the returns on deposits and insurance when the investment is maintained for at least five years and a maximum of 5,000 euros per year. Said benefit refers to the tax exemption from paying taxes on the capital gains generated in said insurance or deposit.
  • Regarding pension plans, the maximum deductible annual contributions is lowered to 8,000 euros per year from the previous 10,000 euros (12,500 euros in the case of those over 50 years of age). The money contributed can now be redeemed after ten years from the beginning of the contributions. Previously, liquidity could only be made in the case of long-term unemployment or access to retirement.
  • The shares delivered by the company to its workers are also no longer exempt and, finally, the houses bought after 1994 will lose their abatement coefficients and those acquired before this date will keep them but up to a transfer value of 400,000 euros. Finally, the inflation corrector is eliminated in the sale of any property.

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