Taxation For Employees Tenerife - what deductions you face

taxation for employees tenerife

If you're lucky enough to have a legal, binding contract with a company in Tenerife, your tax obligations are, unlike some categories of workers, reasonably straightforward.

Income Tax

Some good news and some bad.

First, the good news is that your employer will keep back some of your salary as your income tax. That's you sorted as far as paying your tax goes.

But that's not the end of it - and this is the bad news. Although your tax has automatically been paid by your employer, you still have to file a tax declaration form yourself. The tax year runs from January 1st to December 31st and the declaration must be submitted between the 1st of May and the 20th of June, the following year.

The form required for this will probably be Form 100. There are others, for different categories of work, but this is the one used by most employed people in Tenerife.

No-one will send you this form. You have to go the local Tax Office to pick one up. (They are also available, puzzlingly, at tobacconists!) And here comes the reason for this bit being the bad news. It is 13 pages long and extremely complicated to fill in.

Hopefully, you'll have, by this time, employed the services of a tax advisor and he'll be able to fill it in for you. Okay, so he'll charge a fee for this, but don't forget, he may be able to save you some tax.

The PADRE System

In order to help people with submitting tax returns, the Tax Office has inaugurated a computerised system, with the snappy name of Progama de Ayuda a la Declaración del Impuesto sobre la Renta de las Personas Fisicas. Meaning, roughly "Personal Tax Return Help Programme" it can, thankfully, be abbreviated to PADRE.

You first telephone your Tax Office for an appointment. Then you need to take an absolute mass of documentation with you - passport, residencia, NIE, bank statements plus anything else pertaining to potential earnings.

The PADRE system may also be accessible at some banks. But, when all said and done, it would be best letting a professional tax advisor deal with it. He'll charge between 35 and 60 euros, but at least he'll know what he's doing.

taxation for employees tenerife

Social Security

Here's where the employee is on a winner. Your employer should have registered you with the Social Security office before you started work and you will then have a small amount deducted from your salary towards your monthly contributions. The actual amount is determined, to a certain extent, by the size of your wage, but is roughly 6.5%

The employer, on the other hand, is responsible for paying the major part of your contribution - a whopping 31.5%!

Working for "Cash In Hand"

Some businesses, such as restaurants, may try employing staff on a casual basis, paying them cash in hand. For instance, waiters, entertainers and PR people can frequently be employed like this.

If you accept this sort of employment, you're technically self-employed and should register yourself as such. If you decide to risk it and earn money without notifying the Tax Office, you'll be stuck with a very large fine if caught, as will the owner of the business where you are working.

Any type of tax evasion, or submitting false tax returns, is punishable with an extremely hefty fine.

taxation for employees tenerife