Withholdings to non-resident employees
Companies or individuals (freelancers) with employed persons are bound to withhold them or make payments on account of the income that satisfies them.
In general, a person who works in Spain is considered a tax resident here, and therefore is subject to the Personal Income Tax (IRPF). In these situations, payers must enter the withholdings made through 111 Form. The amount of the withholding will vary for each person based on their income, and their personal and family situation.
What happens when a worker does not have the consideration of tax resident in Spain?
There can be several reasons why an employee is considered a non-resident for tax purposes, for example, if he is here temporarily for a short period of time, that sporadic work is carried out in Spain, or that he has just arrived and has not yet been in Spanish territory for a period exceeding 183 days in the same calendar year.
If any of these requirements are met and, consequently, the employee is considered a non-resident tax, it will be subject to Non-Resident Income Tax (IRNR) instead of being subject to the Personal Income Tax. In this case, the employer will be required to enter the withholdings made through 216 Form.
The percentage on which the withholding is applied is 24%, with the exception of IRNR taxpayers who have their tax residence in another Member State of the European Union or in Iceland and Norway, in which case the withholding will be 19%. All this without prejudice to the existence of an Agreement to avoid Double Taxation, and that it establishes a different percentage for this type of income.
Specialties why a natural person has to be withheld through 216 form
There are other reasons why the withholding of a taxpayer through Form 216 must be entered without being considered a taxpayer of the Non-Resident Income Tax, these are the following:
Prior presentation to 247 form
Employed workers who are not contributors to the Non-Resident Income Tax but who are going to acquire said condition as a result of their move to another country, when it is foreseeable a stay in it exceeding 183 days in the same calendar year from the beginning of the start of work in the other country, they may request retention in accordance with the regulations applicable to non-residents (IRNR) for the year in which it is anticipated that they will acquire this condition.
For this, it is necessary for the interested party to submit the 247 Form communicating the trip abroad, providing a certificate signed by the employer in which the fulfilment of the requirements is accredited. Once this statement is submitted, if it is done correctly, you must receive, within 10 days at the taxpayer’s address, a certificate from the Tax Agency that must be provided to the employer, in which it is said that from the time of issuance of said certificate, the employee withholdings must be carried out in accordance with the regulations of the Non-Resident Income Tax.
Taxpayers who apply the special tax regime applicable to workers displaced to Spanish territory regulated in article 93 of the Personal Income Tax Law (Beckham Law) may choose to pay taxes on Non-Resident Income Tax – with some special rules – maintaining the status of taxpayers for the Income Tax for Individuals.
Once the application of this special regime is accepted, the Tax Agency will send a certificate at the address of the interested party with the detail of the exercises in which you will have the right to benefit from it, which must be provided to the employer to apply the withholdings according to the regulations of non-residents, which must also be done through Model 216.