Normalization

To prevent large differences between the estimated IRPF tax rate and the real tax contribution needed at the end of the year, a process calculates the withholding percentage multiple times during the year. This process is called normalization. The percentage withholding normalization process accounts for incomes earned and taxes and contributions paid, as well as income, tax, and contribution estimates for the remainder of the contract period or year.

PeopleSoft Global Payroll for Spain delivers a page where you can define the normalization schedule for IRPF calculation.

The Normalization Schedule ESP page is read by the regular payroll process list to determine when to run the normalization process. The exception to this is that the process is always run for new hires in the month that they are hired and for all employees who are compensated on a net to gross basis. You may need more than one schedule if you have different tax calculation dates for different pay entities.

Overriding IRPF Normalization

Even when the normalization schedule indicates that the system should normalize tax rates, it only does so if there have been changes to tax calculation data since the previous tax calculation. Additionally, when the system eventually normalizes tax rates, it does not apply tax rate limits according to Article 87.5. By overriding the variable CLI VR CALCULA TAX, you can force normalization and choose whether the system applies Article 87.5 tax rate limits.

CLI VR CALCULA TAX can be overridden at the pay entity, pay group, payee, or calendar level. If you enter a value for CLI VR CALCULA TAX other than the default value of 0, the system recalculates the tax rates for all payees affected by the override. For values 1 through 10 and 13, the system applies tax rate limits according to Article 87.5. For values 11, 12, 14, and 15, the system does not apply the Article 87.5 tax rate limits.