What Are the Paro and IRPF?

When you move here and start working, there will be a host of words and phrases you hear that are clearly important but you're not yet quite sure what they mean. In this series "What is," we'll give you a short overview of some such key items and the tools you need to go and find out more

What Is el Paro?

this is a colloquial term for unemployment and is often used to describe the state benefit you get if you are made redundant (e.g. ¿tienes el paro? means are you getting unemployment benefit?). While no-one likes or wants to be made redundant from their work, it has to be said that terms here are favorably skewed towards the employee, provided that you have worked the minimum amount of time as dictated by your contract or sector's labor agreement (convenio) to make you eligible. Many people are entitled to 45 days for each year worked in compensation for being laid off, and the paro itself is generally a percentage of your final salary; although there is a cap on this, the maximum is the region of a comfortable €1,000 or so a month. The length of time that you can claim the paro depends on how many days you have worked altogether during your career (not just in the last company you were with), although again there is a maximum—if you have come from another EU country in which you were working, you may well also be entitled to a longer term for claiming unemployment benefit thanks to the period worked there.

To find out more about unemployment and benefits here in Spain, as well as making social security contributions, visit the website of the Spanish Social Security system; some of the information is available in English.

What Is IRPF?

IRPF stands for impuesto sobre la renta de las personas físicas, although it is often shortened to just renta—in English, this is income tax. Every year between May and June, you have to file a declaración de la renta, tax return, declaring what you earned and what tax you paid during the previous fiscal year (in Spain, this coincides with the calendar year running from January to December) and discover if you qualify for a rebate or have to make up a shortfall. In advance of the declaration period, generally around March and April, you should start receiving fiscal information that you need to use to do file your declaración, such as information from banks about how much interest you made on current and savings accounts, the amount paid into any private pension (this makes you eligible for a reduction in the amount of tax due), details from charities about any donations you made (these make you eligible for a reduction in the amount of tax to pay) and a break down from your employer, if you worked during the relevant period, of how much income tax was taken from you as well as social security payments made; oddly, there is quite a trend here of undertaxing people during the year, so if you feel that your tax level is too low and don't want a nasty shock when you do the declaración, it's a wise idea to query it with your personnel department and find out if you can raise the amount you pay each month.

The tax form itself (downloadable from www.aeat.es; the document is called PADRE) can be complicated to fill in, but the bank where you have your main current account should offer you a free assistance services. You might need to make an appointment, so it's best to check as early as you can. Your local tax office also offers this service and again a prior appointment is key, so it pays to be organized.

Of course, not everyone has to make a declaration; in general terms, if you earn less than €22,000 then it is not necessary. However, there are particular rules and regulations in the cases of those people who earn money from more than one source. For details, you should get in touch with your local tax office (delegación de la Agencia Tributaria).