Spain

Registrations and Establishing an Entity

It is not mandatory to have a local entity to process payroll. Companies may operate via a non-resident registration. Alternatively, they can register a branch or incorporate a company. A branch is not legally independent and shares liability with the parent company. Registration with the Mercantile Register, tax office, and social security system is required before payroll can commence.

Banking

Spanish banks typically open from 08:00 to 14:00, Monday to Friday, with some offering extended hours in winter. Payments to employees and authorities must be made from an in-country bank account.

Working Week

The standard working week is 40 hours. Overtime is capped at 80 hours per year. Daily working time and breaks are determined by collective agreements.

Employment Law

Holiday Accrual
Employees are entitled to 30 calendar days of annual leave. Leave is not convertible to cash unless at termination.

Maternity Leave
16 weeks, with two additional weeks per additional child. Six weeks post-birth are compulsory. Leave can be taken part-time and shared with the father. Benefits are state-funded.

Paternity Leave
Also 16 weeks, with 6 weeks compulsory immediately after birth. The remaining 10 weeks can be taken part-time or consecutively.

Sick Leave
Paid sick leave starts on day four. The employer covers partial pay until day 15; from then on, the State pays. Accidents or occupational illnesses are covered from day one.

National Service
There is no compulsory military service in Spain.

Tax & Social Security

The tax year runs from 1 January to 31 December.

Income Tax
Monthly income tax is withheld and paid to the Agencia Tributaria. The system is progressive, with rates ranging between 19% and 47%. Employers submit Form 111 monthly and Form 190 annually.

Social Security Contributions

Contributions are paid monthly. Delays result in a 10–20% penalty.

Payroll

Online payslips are accepted. Payroll records must be kept for at least 4 years. Wages must be paid monthly unless otherwise agreed.

Reports

Payroll and social contributions are submitted monthly via Form RLC/RNT. Year-end reporting includes Form 190 and employee income certificates.

Payslip Example

Reporting

All employees must be registered with social security before their first working day. Employment contracts and family status (Form 145) must be submitted.

New Employees

Employers must register employees electronically with the Social Security Office. Documentation includes an ID document and signed employment contract.

Leavers

Authorities must be notified within three days of termination. Final pay is typically settled on the last working day. Unused holidays are compensated in cash.

Employee Benefits

Tax-free mileage is capped at €0.26/km. Company cars, meal vouchers over €11/day, and private insurance are taxable. Employers must report all benefits for inclusion in social security calculations.

Expenses

Reimbursed outside payroll where possible. Indemnities for transfers, dismissal, or bereavement are excluded from base salary for social contributions.

EU nationals can work freely. Non-EU workers must obtain a work and residence permit. Employers must prove a job cannot be filled locally unless the role is on the shortage list. Permit applications require proof of employment, accommodation, and qualifications. Once granted, the visa must be activated within 3 months, and the worker must register with social security and apply for a foreigner ID.

Collective labour agreements are widely used and may override general terms. Employers with more than 50 staff face higher scrutiny and must contribute to public funds upon dismissals of older workers. Certain employee classifications affect contribution rates and entitlements.

Further Information

For more information, or assistance with Spain Tax inquiries please contact: gi@activpayroll.com

About This Payroll and Tax Overview

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.