Estimating Variable Income

PeopleSoft Global Payroll for Spain enables you to determine at the earning level which calculation method to use for estimating the variable compensation part of the tax base. For example, you might need to change how you estimate the variable compensation because the bonus is following a different schedule compared to last year or a bonus or commission is not being paid anymore this year when it was last year.

You can calculate the variable compensation part of the estimated tax base by using any of these three methods:

  • Method 1 is based on last year's values and used for variable compensation that follows last year's schedule.

    When you define an earning in PeopleSoft Global Payroll for Spain, you must update some accumulators to define whether the earning is paid and taxable and contributes to social security. When defining whether the variable earning is taxable, you must assign the CLI AC ING VR1 S accumulator to specific earnings to indicate this estimation method.

    This method uses the array TAX AR ING VAR EST to retrieve values from record GPES_TAX2_RSLT, which stores every calculation result. This array adds that part of the variable compensation to each slice between the pay period end date of the previous year and the end date of that same year. For example, if you calculate the estimated variable income for March 2006, the array totals every variable income from April 1, 2005 to December 31, 2005.

  • Method 2 is based on last year's values and is used for variable compensation that does not follow last year's schedule.

    When you define an earning in PeopleSoft Global Payroll for Spain, you must update some accumulators to define whether the earning is paid and taxable and contributes to social security. When defining whether the variable earning is taxable, you must assign the CLI AC ING VR2 S accumulator to specific earnings to indicate this estimation method.

    Use this calculation method when you expect differences in the earnings payment schedule but want to use the previous year's values in the estimation because you do not know the current year's values.

    This calculation method uses the previous year's total variable income, rather than a specific period, as the maximum variable compensation (base amount) value for the variable compensation part of the estimated tax base for the current year. Each month the calculation process subtracts the year-to-date variable compensation amount from this base amount to determine the tax base estimation for variable compensation. When the payee reaches the base amount limit, the calculation process does not perform the variable compensation estimation again for the rest of the year. For example, if last year a payee earned 10000 euros and by June of this year the payee has already earned 9000 euros, then the calculation process uses only the remaining 1000 euros as part of the tax base estimation for the variable compensation. When the payee reaches the 10000 euros limit, the system stops calculating the variable compensation estimation and uses the actual data.

  • Method 3 is based on current year values and is used for variable compensation for which you know the current year values.

    When you define an earning in PeopleSoft Global Payroll for Spain, you must update some accumulators to define whether the earning is paid and taxable and contributes to social security. When defining whether the variable earning is taxable, you must assign the CLI AC ING VR3 S accumulator to specific earnings to indicate this estimation method.

    Use this calculation method when you know what is going to be paid this year for earnings of variable compensation. The calculation process estimates the variable compensation part of the tax base based on the information that is already in the system for current-year variable income as entered through payee earnings and deduction assignment. To be able to perform that estimation, you set the variable CLI VR EST ASIGN to Y.

The system makes no differentiation between fiscal territories when estimating the variable compensation. The system performs the three calculation methods, including the corresponding earnings based on their setup (which CLI VR ING VRx S the earnings contribute to) in each method. The system calculates the variable tax base as a sum of year-to-date value, plus the current month value, plus the estimated value for the remaining months in the year.