Taxes and contracts

Taxes and Contracts in Gran Canaria

Everything you need to know about employment law in Gran Canaria, taxes in Gran Canaria, employment contracts in Gran Canaria and social security in Gran Canaria.

So what are your rights? how much tax do you have to pay? Can I be paid in cash and how will that affect me? Have a look at our guide below and banish all your worries.

Social Security

The Spanish Social Security system is very much like the British one. You contribute every month and that entitles you to sick pay, a pension, maternity leave, paternity leave and unemployment benefit. The amount of benefits you receive depend on your contributions.

To register for Social Security you will need a NIE. See our guide on how to get a NIE. When you get a work contract your employer is legally obliged to pay your social security contributions. Some employers will pay some of your salary cash-in-hand to avoid paying the full contributions. You will still be eligible for healthcare however you will get less sick pay and unemployment benefit if you need it. If you are paid 100% cash in hand you will not pay any contributions and will therefore not be eligible for any benefits. If you are self employed you need to pay social security, it is about 225 euros a month and forms can be obtained from your local Seguridad Social office.

Personal Income Tax (IRPF):

Everyone has to pay income tax. You should pay it in your monthly salary and when you do your compulsory tax return the following year you shouldn’t have to pay any extra.

This tax applies if you are a resident. It is the standard “IRPF” income tax that most Spaniards pay. The tax rates for 2005 are as follows. You pay different rates on different portions of your income. So, if you earn 20,000€, you pay the first 4000€ at 18%, the next 9800€ (13,800 – 4000) at 24%, and the final 6200€ (20,000 – 13,800) at 28%.



Income

Tax rate on this portion

< 4000€

15%

4000€ – 13,800€

24%

13,800€ – 25,800€

28%

25,800€ – 45,000€

37%

> 45,000€

45%

Nonresidents Income Tax (IRNR)

Non residents will have to pay income tax if they own a property, have received dividends from a Spanish company or have earned a salary in Spain.

For a more detailed guide to paying taxes see http://www.strongabogados.com/taxes.php

Contracts

All contracts will be based on a convenio for the particular industry. A convenio is set of guidelines on which your contract will be based, specifying such things as hours to be worked, holidays etc.

Indefinite contracts

The main characteristics of the normal indefinite contract are:

· It is indefinite, unless specified otherwise.

· Severance pay for improper dismissal is a maximum of 45 days salary for every year worked, up to a maximum of 42 months equivalent salary.

· There are no Social Security subsidies or any other financial incentives.

Temporary contracts

The main types are:

Contract for a specific project or service, arranged for the purpose of performing work or providing a service which is temporary but of uncertain duration.

Casual contract due to production overload or backlog. The maximum duration of this type of contract is six months in any twelve-month period.

Contract to sit in for employees entitled to return to their job. The duration of this contract is the period during which the absent employee retains the right to return to his or her job.

No contract? Cash in hand.

Most jobs you get will offer you a fixed contract and they will pay your income taxes for you. However if you are self-employed or are receiving cash in hand, legally you have to pay autonomous contributions to pay for your social security. These start at 225€ a month. To pay this you need to go the local office for Seguridad Social and ask for a contract to pay Seguridad Social for an Autonomous contract. Most people do not declare wages they receive cash in hand and it is unlikely the tax office will catch up with you but it is illegal.

Jobs in the South

Most employers will give 3 month rolling contracts. However, by law, after a year employers are obliged to give fixed contacts. To avoid this most employers will dismiss their staff after a year and then re-employ them 6 weeks later.

For a more detailed guide on the different types of contract available see: http://www.strongabogados.com/employees.php

Claiming Social Security Benefits in Spain

If you are claiming jobseeker’s allowance, a pension or certain other benefits when you leave the UK, you may be able to get your claim transferred to Spain. See The Department for Work and Pensions website for details. If you leave a job in order to move to Spain, you will not be able to claim any benefits.

If you have been employed in Spain for 6 months and you lose your job, you will generally be entitled to Spanish unemployment benefit. If you are employed or self-employed, you will also be entitled to sick pay, maternity pay and, when you retire, a pension. All benefits are paid at variable rates depending on the level of your contributions. If you have been paying minimum social security contributions the amount you will receive in benefits is currently around 750 EUR per month. If you are planning to live in Spain long term you should contact the DSS overseas department (above) in order to get your UK NI contributions transferred to the Spanish system.

Payslip

For a detailed summary of what your payslip means visit http://www.strongabogados.com/payslip.php

RENTA / Tax return

At the end of the year everyone has to do their tax return (RENTA). The RENTA has to be done between January 1 and June 30 the following year. The earlier you do it the quicker your application is processed. See our guide on how to do your RENTA without going mad!

Gran Canaria Guru Team
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