Briefing note: calculation of withholdings as of July 5, 2018
Briefing note: calculation of withholdings on work income that are satisfied or paid as of July 5, 2018
INFORMATION NOTE REGARDING THE CALCULATION OF WITHHOLDINGS ON WORK INCOME PAID OR PAID FROM JULY 5, DATE OF ENTRY INTO FORCE OF THE PGE-2018 LAW.
Law 6/2018, of July 3, on the General State Budgets for 2018, (BOE of July 4) modifies article 101 and introduces a new Additional Provision 47 in the Personal Income Tax Law. These provisions establish, as of their entry into force, three relevant modifications in relation to the calculation of the percentage of withholding and payment on account to be applied on the income from work that is satisfied or paid from that moment on; specifically:
- New exclusive limits on the obligation to withhold (previously contemplated in article 81.1 of the Personal Income Tax Regulations), establishing higher amounts and differentiating the limits in the case of the group made up of Social Security pensioner taxpayers or passive classes or who receive unemployment benefits or subsidies;
- For the purposes of determining the withholding base established in article 83.3 of the Tax Regulations, the amounts of the reduction for obtaining income from work regulated in article 20 of the Tax Law for lower net income from work are modified upwards. at 16,825 euros annually; and
- Finally, the reduction in the percentage of withholding or payment on account on work income is increased from 50 to 60% in the case of taxpayers residing in Ceuta or Melilla and who obtain work income there that can benefit from the deduction for obtaining of income in Ceuta and Melilla contemplated in article 68.4 of the Tax Law.
These modifications will only affect those workers who are in one (or more) of the following situations:
- Workers whose net earnings from work in 2018 (once the reductions due to irregularity have been applied, where applicable) do not exceed 16,825 euros per year.
- Residents in Ceuta or Melilla who, throughout the 2018 financial year, have obtained income from work in said cities who can benefit from the deduction for obtaining income in Ceuta and Melilla of art. 68.4 LIRPF.
- Taxpayers who have obtained full annual income not exceeding 22,000 euros throughout the 2018 financial year and the limit established in article 85.3 of the RIRPF on the withholding fee must be applied to them (limit that is affected by the new limits excluding the obligation to retain).
Therefore, in accordance with the provisions contained in DA 47 LIRPF, to calculate withholdings and payments on account on the income from work that are satisfied or paid in 2018 to taxpayers who are in one or some Of the previous situations , the following must be taken into account:
- The withholdings and payments on account to be made on the work income that are satisfied or paid until the day before the entry into force of the LPGE-2018 and, therefore, of the modifications introduced by this LPGE in the LIRPF, will be calculated in accordance with the general retention procedure in force as of December 31, 2017.
- The withholdings and payments on account to be applied on the work income corresponding to the rest of the tax period, which are satisfied or paid as of July 5, will be calculated by obtaining a new type of withholding, practicing the corresponding regularization of the retention type, with the following new features:
- That for the purposes of the reduction for obtaining income from work referred to in letter d) of art. 83.3 RIRPF, the provisions of the second paragraph of section 1 of the new DA 47 of the LIRPF will apply.
- The new exclusive limits of the obligation to withhold, contained in point 1) of section 2 of the new DA 47 LIRPF, will apply, which are reproduced below:
General applicable limits, except in the case of pensions or passive assets from the Social Security or Passive Classes regime, or unemployment benefits or subsidies: Taxpayer situation Number of children and other descendants that give the right to the minimum for descendants {1} 0 1 2 or more Single, widowed, divorced or legally separated {2} _ 15,168 16,730
Taxpayer whose spouse does not obtain income greater than 1,500.00 euros per year, excluding exempt income {3} 14,641 15,845 17,492 Other situations {4} 12,643 13,455 14,251 Applicable limits in the case of pensions or passive assets from the Social Security or Passive Classes regime, or unemployment benefits or subsidies: Taxpayer situation Number of children and other descendants that give the right to the minimum for descendants {1} 0 1 2 or more Single, widowed, divorced or legally separated {2} _
15,106.5 16,451.5 Taxpayer whose spouse does not obtain income greater than 1,500.00 euros per year, excluding exempt income {3} 14,576 15,733 17,386 Other situations {4} 13,000
13,561.5 14,184 The amounts in this second table will increase by 600 euros for pensions or passive assets from the Social Security and Passive Classes regime and by 1,200 euros for unemployment benefits or subsidies.
- And, finally, the maximum withholding rate percentages established in articles 85.3, 86.2 and 87.5 of the RIRPF will be taken into consideration.
When this exceptional regularization should be practiced
The type of withholding or payment on account, in these cases, will be regularized, if applicable, in the first earnings from work that are satisfied or paid after the entry into force of the PGE-2018 Law, that is, starting July 5 .
However, with respect to the affected workers, the regularization referred to in the previous paragraph may be carried out, at the option of the payer, in the first work returns that are satisfied or paid as of August 1 , in which case, the type of withholding or payment on account to be applied on the work income paid prior to this date (that is, until July 31 ) is will be determined taking into consideration the regulations in force as of December 31, 2017.
Procedure to carry out regularization
With respect to workers included in any of the aforementioned situations, the regularization of the withholding rate will be carried out in the following way, even if none of the variables relevant to this effect have undergone a change:
- A new withholding fee is calculated in accordance with the provisions of art. 85 of the Regulation, that is, in general terms:
- First determining a new “basis for calculating the withholding rate” and applying the rates that result from applying the withholding scale of article 101.1 of the LIRPF.
- The resulting amount will be reduced by the amount derived from applying the previous scale to the amount of “personal and family minimum” to calculate the type of withholding, without the result of this reduction being negative.
- A new “withholding rate” will be calculated by multiplying by 100 the quotient obtained by dividing the new withholding fee by the total amount of remuneration (Art. 86 of the Regulation).
- This new withholding fee will be reduced by the amount of withholdings and payments on account made between January 1 and on July 4 (or, where appropriate, at the option of the payer, until July 31 , when the regularization is carried out on the first returns paid from August 1 ).
- The new type of withholding applicable as of July 5 (or as of August 1 , at the option of the payer) will be obtained by multiplying by 100 the quotient obtained by dividing the difference resulting from the section above between the total amount of remuneration remaining until the end of the year and will be expressed with two decimal places.
These operations can be carried out by using the new version of the withholding calculation service available on the AEAT website on the Internet, starting on July 4 2018.
In order to correctly carry out the aforementioned regularization, regularization cause “11” (Other causes) of those provided in said Calculation Service must be used, with the sole exception of the concurrence of this exceptional case of cause 11 with any of the cases identified with cause 9 or cause 10 (that is, the communication of the right or, where appropriate, the loss of the right, of the recipient to the reduction of the withholding rate for the payment of loans for the acquisition of the habitual residence), the latter circumstances which, if applicable, require the use of the causes 9 or 10 (and not cause 11) to correctly carry out the regularization corresponding to both reasons.
When regularizing in the month of July (or in August, at the option of the payer) resorting to cause 11, the application will require the completion, also exceptionally, of the following boxes (in addition to those that are normally required when cause 11 of regularization is recorded, that is, remunerations already paid and withholdings already made prior to regularization):
- Annual remuneration considered prior to regularization.
- Yields prior to regularization were obtained in Ceuta and Melilla.
- At some point before regularization, a reduction was applied for housing loan payments.
- Amount of the reduction for housing loan payments determined before regularization.
It is very important to highlight the exceptional nature of the use of cause 11 for regularization. Therefore, once the regularization of the month of July 2018 (or August, at the option of the payer) has been made to the affected workers, through the use of said cause, the subsequent use of this cause 11 should be limited only to the cases for the which is expressly provided for , which are those indicated in the 2018 Withholding Calculation Service Help, published on the AEAT website. These assumptions are the following:
- When it is appropriate to regularize the type of withholding because the recipient has acquired, during the course of the calendar year, the status of personal income tax taxpayer due to a change of residence.
- When it is appropriate to regularize the type of withholding because the recipient has changed, during the course of the calendar year, his habitual residence from Navarra or the Historical Territories of the Basque Country to the rest of the Spanish territory.
- When it is appropriate to calculate the new type of withholding in the cases referred to in article 118.3 of the RRPF, due to the exclusion of the recipient from the special tax regime for the Non-Resident Income Tax provided for in articles 113 and following of the cited Regulation.
It is also important to highlight that, apart from the exceptional case discussed in this Note, when cause 11 is recorded, as a reason for regularization due to the occurrence of any of the three previous cases during the year, only the sections corresponding to :
- Remunerations already paid prior to regularization.
- Withholdings and payments on account already made prior to regularization.
Consequently, after July 2018 (or August, at the option of the payer, regarding the changes introduced by the new LPGE-2018) it is incorrect to use cause 11 to regularize the withholding rate in situations other than the three previously indicated , since said use, in addition to being improper, can provide the user with erroneous results.
Finally, it should be noted that to determine the type and amount of withholdings corresponding to recipients hired after July 4 of 2018, the new version of the 2018 Withholding Calculation Service will be used. (the one in force as of the entry into force of the LPGE-2018) without the need to carry out the regularization referred to above, without prejudice to the regularizations that may subsequently proceed for other reasons.
Madrid, July 4, 2018