Tax advisor: The 2% income tax withholding is not applicable to discontinuous permanent employees.

In the binding consultation V0040-23 of January 16, 2023, the Directorate General of Taxes resolves whether and what is the withholding rate to be applied to a permanent employee with an indefinite term contract, as long as his income from work is less than the withholding obligation limit. The question arises as to whether the minimum rate of 2% provided for in Article 86.2 of the IRPF Regulation (RIRPF) would be applied.

Said article 86 of the IRIPF determines that:

“The withholding rate shall be that resulting from multiplying by 100 the quotient obtained from dividing the withholding fee by the total amount of the remuneration referred to in Article 83.2 of these Regulations, and shall be expressed to two decimal places. The withholding rate resulting from the provisions of the preceding paragraph may not be less than 2 percent in the case of contracts or relationships lasting less than one year or deriving from a special employment relationship of the artists who carry out their activity in the performing, audiovisual and musical arts, as well as of the persons who perform technical or auxiliary activities necessary for the development of such activity, nor less than 15 percent when the income from work derives from other special employment relationships of a dependent nature. The aforementioned percentages will be 0.8 percent and 6 percent, respectively, in the case of earned income obtained in Ceuta and Melilla that benefit from the deduction provided for in Article 68.4 of the Tax Law.”

According to this, only this 2% withholding is applied in cases where contracts under one year are operated as minimum rate and when the rate of the procedure is lower.

In this way, the amount to be withheld will be provided for in Article 82 in all cases, as these are discontinuous permanent workers, since there is a permanent relationship for an indefinite period of time.

B Law & Tax International Tax & Legal Advisors.

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