Calculating the Withholding Percentage

Once the system has calculated the taxable net base and the personal and familiar minimum reductions, it calculates the withholding percentage. The system employs different formulas, depending on the fiscal territory:

  • For the state territory, the system uses the TAX FM CT IRPF EE formula to compare the taxable net base with the income ceilings defined on the Tax Ceiling page and generate the total contribution amount.

    The system calculates the contribution using two factors: Quota 1 and Quota 2. Quota 1 is the result of applying a bracket to the total taxable base. Quota 2 is the result of applying the bracket to the personal and familiar minimum reductions. The total contribution quota = Quota 1 − Quota 2.

    For payees paying alimony for child support the system uses a special calculation for the total contribution quota.

    See Calculating Garnishment Taxation.

    After the system calculates the total contribution quota, it determines the withholding percentage using the formula TAX FM PCT IRPF EE. The system applies the active reductions to the contribution and divides that value by the total taxable income to determine the withholding percentage. There are certain limits on the final percentage in the absence of regularization. When you do run the regularization process, the system uses the formula TAX FM REGULARZN to comply with legal requirements.

  • For historical territories, the system uses the formula TAX FM HT PCT EE to calculate the Withholding percentage. The formula compares the taxable net base with the Withholding Brackets for the historical territory. For disabled payees, the system adjusts the percentage by subtracting the Disability Bracket percentage from the Withholding Bracket percentage.

PeopleSoft Global Payroll for Spain delivers and maintains tax brackets. You can view and update tax brackets using the Withholding Segments page.

Payees can increase their percentage using the Tax Percentage Override page. However, if the override is lower than the calculated percentage, the system uses the higher amount. You cannot use the Override Tax Percentage ESP page to reduce the tax percentage.