Spain: Employee Incentives

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This country-specific Q&A provides an overview to tax laws and regulations that may occur in Spain.

This Q&A is part of the global guide to Employee Incentives. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/practice-areas/employee-incentives/

  1. What kinds of incentive plan are most commonly offered and to whom?

    Kinds and structure of incentive plans to be offered depends mainly on the industry where the company operates and the role of the individuals to whom the incentive will be offered.

    Bonus, commissions and incentives are the kind of incentive plans most commonly offered to employees in Spain. On the contrary, share option plans are not commonly offered by local Spanish companies but are frequently offered by Spanish subsidiaries of multinational companies.

    Spanish employment regulations do not contain specific provisions on bonuses and commission so issues or conflicts related to bonus and commissions are usually solved by labour court on a case by case basis.

    Incentive plans are more commonly offered to sales roles and leadership roles. Sales roles and leadership roles usually have explicit pay outs tied to specific deliverables. By contrast, engineering and accounting roles are less likely to have high amounts of variable pay.

  2. What kinds of share option plan can be offered?

    Spanish employment regulations do not contain any specific provisions on the kinds of share option plans might be offered by companies to their employees. Consequently, companies have flexibility regarding the selection of the kind of share option plans to all employees regardless of whether they are executives provided that anti-discrimination rules are considered when awarding options.

    Although there are no specific labour law provisions concerning share-linked awards, the most common share plans plans are the following ones:

    Share option plans

    Under an option plan, employees are granted options to buy the company's shares at a fixed price. The exercise of the option must take place within a set period.

    Performance-based options

    Options in some share option schemes may only be exercisable if certain conditions are met. The conditions generally relate to performance objectives.

    Phantom share options

    In phantom share option plans, options over shares are not granted. Instead, a cash award is made equivalent to the gain the employee would have made if the employee had exercised options over real shares.

  3. What kinds of share acquisition/share purchase plan can be offered?

    The following types of share-based plans can be offered, although no specific laws or regulations apply:

    • Employee stock ownership plan: Under this type of plan, employees receive free shares or pay a price for the shares that is lower than market value.
    • Restricted share plan: Two kinds of restricted share plans could be distinguished:

    - Plans where the acquisition of shares is subject to certain specific conditions such as the company/employee´s performance, the share price reaching a certain value, etc.

    - Plans where acquired shares cannot be sold until a certain period has elapsed.

    • Deferred stock unit plan: Under this type of plans companies undertake to provide employees with a certain amount of free shares each year during a certain period.
  4. What other forms of long-term incentives (including cash plans) can be offered?

    In addition to bonus, commissions and incentives, companies may offered retention awards as cash plans. Retention bonus entail the payment to the employee (normally managers or executives) provided that he/she remains in the company on a given date. Retention bonus are usually implemented in the case of merges or acquisitions as a tool to retain the employee during the transaction period.

    In addition to share option plans or stock options plans, companies may also offer restrictive stock units. Similar to options, there’s a vesting period where the employee must satisfy certain conditions before the stock or its value is transferred (typically, there is a period of time and other conditions – e.g., work performance). Unlike stock options, there is no purchase involved. Instead, a certain number of units are allocated – or granted – to the employee, but there is no value or funding until the employee has satisfied the vesting requirements. After vesting, RSUs are transferable if the employee accepts the grant. The value of the RSUs is the closing market value of the stock price on the vesting date.

  5. Are there any limits on who can participate in an incentive plan and the extent to which they can participate?

    Considerations from an employment point of view.

    Who can participate in an incentive plan. Companies can grant incentive plans to all their employees regardless of whether they are senior executives. Nevertheless, individuals of third entities rendering services for the company (e.g. consultants) should not be remunerated by means of the incentive plan to the extent that this would be an indication of illegal assignment of employees.

    The Spanish Constitution and Statute of Workers prohibits discrimination on the grounds of birth, race, gender, religion, opinion, or any other personal or social status, including: civil status, age, language, political ideas or being part of a trade union.

    To avoid that the granting criteria could be considered as discriminatory, it is strongly advisable that companies use objective grounds when deciding to which employees they will grant shares such as:

    - Asking for an initial contribution.

    - The company's global performance.

    - The employee´s professional group.

    - The employee's individual performance.

    - The maintenance of the shares for a period.

    - The employee's length of service with the company.

    Maximum value of the incentive plans. The only restriction is that the employees should receive in cash at least the salary stated by the applicable collective bargaining agreement as minimum. Incentive plans should be an additional remuneration to the minimum salary.

    There is no restriction on the maximum value of the incentive plans. The company decides the maximum value and the rules to obtain it (targets to be met, etc.) and this is set out in the plan document.

    Considerations from a mercantile point of view.

    Directors may participate in incentive plans provided that the remuneration they receive under such plans complies with the provisions for the remuneration of directors in the Spanish Companies Act (Ley de Sociedades de Capital), which provides as follows:

    1. The Articles of Association must establish the free or remunerated nature of the position of director. Such remuneration must be one of the following:

    (a) a fixed allocation,

    (b) attendance fees,

    (c) profit-sharing.

    (d) variable remuneration with indicators or general benchmarks,

    (e) remuneration in shares or linked to their development,

    (f) severance grants, provided that the termination was not due to failure to perform the duties of director; and

    (g) such savings or provident schemes as may be considered appropriate.

    Where the remuneration system includes a share in profits, the statutes of the company shall determine in particular the share or the maximum percentage thereof. In the latter case, the General Shareholders´ Meeting (the "GSM") shall determine the applicable percentage within the maximum laid down in the Articles of Association.

    In limited liability companies (Sociedades limitadas or "S.L.s"), the maximum percentage of participation may in no case exceed ten per cent of the profits distributable among the shareholders.

    In public limited companies (Sociedades anónimas, or "S.A.s"), participation may only be deducted from liquid profits and after the legal and statutory reserves have been covered and shareholders have been paid a dividend of four per cent of the nominal value of the shares or the highest rate established by the articles of association.

    In public limited companies, when the system of directors' remuneration includes the delivery of shares or stock options, or remuneration referenced to the value of the shares, it must be expressly provided for in the Articles of Association and its application shall require a resolution of the GSM.

    The resolution of the GSM must include the maximum number of shares that may be allocated each year to this remuneration system, the exercise price or the system for calculating the exercise price of share options, the value of any shares taken as a reference and the duration of the plan.

    2. The maximum amount of the annual remuneration of all the directors must be approved by the GSM and shall remain in force until its modification is approved. Unless the general meeting determines otherwise, the distribution of remuneration among the different directors shall be established by their agreement and, in the case of the board of directors, by a decision of the same, which shall take into consideration the functions and responsibilities attributed to each director.

    The remuneration of the directors must in any case be in reasonable proportion to the importance of the company, its current economic situation and the market standards of comparable companies. The remuneration system established must be geared to promoting the long-term profitability and sustainability of the company and incorporate the necessary precautions to avoid excessive risk-taking and the reward of unfavourable results.

    The GSM may establish a resolution with a broader content, a "remuneration policy".

    In addition, the GSM may issue instructions to the administrative body. Or it may also require that any resolution regarding remuneration of the administrative body be approved by the GSM.

    In addition, if the Bylaws provide for a maximum percentage of profits as a remuneration system. The GSM shall then establish this percentage within the range established in the Bylaws.

    If the Bylaws provide - as a remuneration system - for the delivery of shares or stock options, or remuneration referenced to the value of the shares, then it will be necessary for the GSM to determine the number of shares, the price, the calculation system, the reference value and the duration of the plan.

    3. The Board of Directors is responsible for distributing the remuneration among the different directors according to the functions and responsibilities of each Director.

    The appointment of one or more Managing Directors requires an agreement in writing that includes all the agreed remunerations and even the indemnity for early termination. This contract must have the vote in favour of 2/3 of the members of the Board of Directors and the abstention of the Director concerned.

    The relationship between the CEO and the company is twofold: by appointment by the General Meeting (which appoints him a Director) and by the Board of Directors (which delegates powers).

    Specialties for Listed companies:

    The directors' remuneration policy shall be adjusted as far as corresponds to the system of remuneration established in the Articles of Association and shall be approved by the general meeting of shareholders at least every three years as a separate item on the agenda.

    The proposal for the remuneration policy of the board of directors shall state the reasons on which it is based and shall be accompanied by a specific report from the Appointments and Remuneration Committee. Both documents shall be made available to shareholders on the company's website from the date of the notice of the general meeting, who may also request that they be delivered or sent free of charge. The announcement of the call to the general meeting shall mention this right.

    The directors' remuneration policy approved in this way shall remain in force for the three financial years following that in which it was approved by the general meeting. Any modification or replacement thereof during said period shall require the prior approval of the general meeting of shareholders in accordance with the procedure established for its approval.

    In the event that the annual report on directors' remuneration is rejected in the consultative vote of the ordinary general meeting, the remuneration policy applicable for the following financial year must be submitted to the approval of the general meeting prior to its application, even if the aforementioned three-year period has not elapsed. Exceptions are made for cases in which the remuneration policy has been approved at the same ordinary general meeting.

    Any remuneration received by directors for the exercise or termination of their office and for the performance of executive duties shall be in accordance with the remuneration policy in force for directors at any given time, except for the remuneration expressly approved by the shareholders at a general meeting.

  6. Can awards be made subject to performance criteria, vesting schedules and forfeiture?

    In general terms, companies may establish specific performance criteria, vesting schedules and forfeiture conditions when implementing incentive plans. The key issues is that these conditions are clearly stated and the employee knows them before the accrual period.

    Cash incentive plan such as commissions, incentives or bonus are usually linked to performance conditions without prejudice of the accrual period stated to meet the targets. Otherwise, share option plans usually are linked to vesting schedules as a tool to retain employees and to align their aims with the company's.

  7. What are the tax and social security consequences for participants in an incentive plan including: (i) on grant; (ii) on vesting; (iii) on exercise; (iv) on the acquisition, holding and/or disposal of any underlying shares of securities; (v) in connection with any loans offered to participants (either by the company operating the incentive plan, the employer of the participant (if different) or a third party) as part of the incentive plan.

    Bonus and commissions

    Bonuses and commissions are treated as employment income arising in the tax year in which the employee becomes entitled to receive them and are taxed at a variable rate up to 48% depending on the region where the employee resides.

    Under certain conditions, a 30% reduction over a maximum amount of €300,000 would apply to bonuses and commissions generated over a period of more than two years provided that the employee has not obtained any other income in the preceding five tax years to which this 30% reduction has been applicable.

    The employer is required to make, at the time of payment of the bonus or the commission, a withholding on the amount paid. This withholding tax is fully creditable from the employee’s annual tax liability.

    The company pays social security contributions on behalf of employees. The contribution is calculated by applying a specified rate to a monthly social security base amount.

    The base amount for the calculation is the aggregate monthly salary the employee receives, plus any annual amount not accrued on a monthly basis. The aggregate includes remuneration received from bonus and commissions. The remuneration is pro-rated over the 12-month period of the calendar year in which either the payment of the bonus/commissions takes place.

    There is a cap of €4,070.10 for 2019 on the monthly amount on which social security contributions are calculated.

    If the normal monthly salary exceeds the maximum monthly contribution cap, the salary the employee obtains from the plan does not incur higher social security contributions.

    Stock Options

    Non-Transferable stock options are treated as an employment income on the difference between the market value of the shares at the date of exercise and the exercise price. Such income is deemed as arising in the tax year of exercise and it is taxed at a variable rate up to 48% depending on the region where the employee resides.

    - Position on grant: the employee is not taxed.

    - Position on vesting: the employee is not taxed.

    - Position on exercise: employee receives an in kind employment income on the difference between the market value of the shares and the exercise price.

    Such employment income is not taxed up to the limit of €12,000 per year provided that the following conditions are met:

    - The stock option is granted under the same conditions to all the employees of the company. The company can restrict the incentive to employees with a minimum seniority provided that the seniority required to enjoy the incentive is the same for all the employees.

    - The employee, together with his non-separated spouses or relatives up to the second degree, does not have a, direct or indirect, participation in the company exceeding 5%.

    - The shares acquired are kept for at least 3 years.

    If the stock options are granted more than two years before the date of exercise, the 30% reduction referred to in above over a maximum amount of €300,000 could be applicable.

    On the sale of the shares, the employee derives a capital gain on the difference between the sale price and the market value of the shares on exercise. This capital gain is taxed at a flat rate up to 23%.

    Transferable stock options are treated as an employment income on the market value of the option at the date of grant. Such income is deemed as arising in the tax year of grant and is taxed at a variable rate up to 48% depending on the region where the employee resides. At the date of exercise, the employee derives a capital gain on the difference between the market value of the shares and the exercise price that it is taxed at a flat rate up to 23%.

    - Position on grant: the employee receives an in kind employment income on the market value of the option.

    - Position on vesting: the employee is not taxed.

    - Position on exercise: the employee derives a capital gain on the difference between the market value of the shares and the exercise price.

    This employment income is not taxed up to the limit of €12,000 per year provided that the conditions above mentioned for the non-transferable stock options are met. In addition, the 30% reduction referred to in above over a maximum amount of €300,000 could be applicable.

    On the sale of the shares, the employee derives a capital gain on the difference between the sale price and the market value of the shares on exercise. This capital gain is taxed at a flat rate up to 23%.

    The employer is required to make a payment on account of the employee's annual tax liability on the employment income at the time of exercise (non-transferable stock options) or at the time of grant (transferable stock options) that would be fully creditable from the employee’s annual tax liability. This payment on account can be borne by the employer (increasing the amount of the taxable income for the employee) or charged on to the employee.

    The employer would register the relevant expense for the delivery of the shares which, as a general rule, would be tax deductible for Corporate Income Tax purposes in the tax year of exercise. Notwithstanding the above, when the stock options relate to shares of a group company, such expense would only be tax deductible provided that the employer reimburses the group company for the relevant costs and provided further that there exists a written reimbursement agreement.

    The company pays social security contributions on behalf of employees. The contribution is calculated by applying a specified rate to a monthly social security base amount.

    The base amount for the calculation is the aggregate monthly salary the employee receives, plus any annual amount not accrued on a monthly basis. The aggregate includes remuneration received from stock option plans. The remuneration is pro-rated over the 12-month period of the calendar year in which either the delivery of the shares acquired takes place or when the cash payment is made.

    There is a cap of €4,070.10 for 2019 on the monthly amount on which social security contributions are calculated.

    If the normal monthly salary of a participant in the share option plan exceeds the maximum monthly contribution cap, the salary the employee obtains from the plan does not incur higher social security contributions.

    Restricted stock units (RSUs)

    RSUs are treated as an employment income arising on the date of the delivery of the shares to the employee. Such income is calculated on the difference between the market value of the shares and the price paid by the employee (if any) and it is taxed at a variable rate up to 48% depending on the region where the employee resides.

    This employment income is not taxed up to the limit of €12,000 per year provided that the conditions above mentioned for the stock options are met. If the RSUs are granted more than two years before the delivery of the shares, the 30% reduction referred to in above over a maximum amount of €300,000 could be applicable.

    On the sale of the shares, the employee derives a capital gain on the difference between the sale price and the market value of the shares on the date of delivery. This capital gain is taxed at a flat rate up to 23%.
    The employer is required to make a payment on account of the employee's annual tax liability on the employment income at the time of delivery of the shares that would be fully creditable from the employee’s annual tax liability. This payment on account can be borne by the employer (increasing the amount of the taxable income for the employee) or charged on to the employee.

    The employer would register the relevant expense for the delivery of the shares which, as a general rule, would be tax deductible for Corporate Income Tax purposes in the tax year of delivery. Notwithstanding the above, when the RSUs relate to shares of a group company, such expense would only be tax deductible provided that the employer reimburses the group company for the relevant costs and provided further that there exists a written reimbursement agreement.

    The company pays social security contributions on behalf of employees. The contribution is calculated by applying a specified rate to a monthly social security base amount.

    The base amount for the calculation is the aggregate monthly salary the employee receives, plus any annual amount not accrued on a monthly basis. The aggregate includes remuneration received from RSU plans. The remuneration is pro-rated over the 12-month period of the calendar year in which the cash payment is made.

    There is a cap of €4,070.10 for 2019 on the monthly amount on which social security contributions are calculated.

    If the normal monthly salary of a participant in the RSU plan exceeds the maximum monthly contribution cap, the salary the employee obtains from the plan does not incur higher social security contributions.

    Loans offered to participants

    Interest on loans granted by the employer or the company operating the incentive to the employees is treated as employment income on the difference between the loan’s interest rate and the legal interest rate applicable in the relevant period. Such income is taxed at a variable rate up to 48% depending on the region where the employee resides.

    The employer is required to make a payment on account of the employee's annual tax liability on such employment income that would be fully creditable from the employee’s annual tax liability. This payment on account can be borne by the employer (increasing the amount of the taxable income for the employee) or charged on to the employee.

  8. What are the tax and social security consequences for companies operating an incentive plan?

    Please see answer 7.

  9. What are the reporting/notification/filing requirements applicable to an incentive plan?

    Considerations from an employment point of view.

    Although no legal reporting/notification/filling requirements apply to an incentive plan from an employment perspective, it is totally advisable to provide employees with a copy of the plan with acknowledge of receipt. The company must obtain evidence of (i) the employee´s consent to participate in the plan and (ii) of the fact that the employee knows, understands and agrees with its terms. A copy duly signed by them is highly advisable to try to reduce the risk of claims and to reinforce the position of the company in case that the employee alleges lack of knowledge.

    In addition,, collective bargaining agreements may set out certain specific requirements to be addressed by companies when implementing/modifying or withdrawing an incentive plan.

    Furthermore, the amendment of the incentive plan may qualify as a substantial amendment of employment conditions in which case ,consultation/information duties may also arise for the company.

    Considerations from a mercantile point of view.

    There are no reporting/notification/filing requirements applicable to an incentive plan from a Spanish corporate Law standpoint for companies that are not listed.

    Nevertheless, the board of directors of listed companies must prepare and publish an annual report on the remuneration of directors (Informe Anual de Retribuciones de los Consejeros or "IARC"), including that which they receive or should receive in their capacity as such and, where appropriate, for the performance of executive duties.

    The content and structure of the IARC is determined by the Minister of Economy and Competitiveness or, with his express authorisation, by the CNMV, and shall include complete, clear and comprehensible information on the directors' remuneration policy applicable to the current financial year. It shall also include a global summary on the application of the remuneration policy during the closed financial year, as well as a detail of the individual remunerations accrued for all concepts by each of the directors during said financial year.

    The IARC shall be published as a significant event (Hecho Relevante) in the Spanish Stock Exchange Commission (Comisión Nacional del Mercado de Valores or "CNMV") by the company simultaneously with the annual corporate governance report.

    The IARC shall be submitted to a consultative vote, as a separate item on the agenda, at the ordinary GSM.

    The Directors of listed companies must notify any acquisition/transfer of shares of the company to the CNMV within the three (3) business days following the relevant transaction.

  10. Do participants in incentive plans have a right to compensation for loss of their awards when their employment terminates? Does the reason for the termination matter?

    Considerations from an employment point of view.

    Under certain termination scenarios, employees may be entitled to receive their awards (at least on a pro-rata basis) as well as to continue vesting after their termination. This risk is specially high in case of unfair dismissal (i.e. dismissal without cause) and must be analysed in light to the particular circumstances of the case. To try to reduce (not to eliminate) the risk of claims and reinforce the position of the company in case of conflict, it is highly advisable to include in the plan specific provisions on the consequence of the termination of the employment relationship on the awards under each different scenario.

    Considerations from a mercantile/regulatory point of view.

    Spanish Corporate Law provides no specific rule on the right to compensation for loss of their awards when their employment terminates. In this sense, the provisions of the incentive plan and/or the contract with the employee or administrator shall apply. As explained in paragraph, 5 above, any severance grants, provided that the termination was not due to failure to perform the duties of director, must be provided for in the company´s Articles of Association.

  11. Do any data protection requirements apply to the operation of an incentive plan?

    There are no specific requirements regarding incentives plan neither in the EU Regulation 2016/679 (GDPR) nor in the Spanish Fundamental Law on Data Protection 3/2018 (NLOPD). Compliance with the general requirements contained within the strict framework provided by GDPR and NLOPD is, nevertheless, mandatory.

  12. Are there any corporate governance guidelines that apply to the operation of incentive plans?

    Listed companies need to comply with the recommendations of the Good Corporate Governance Code for Listed Companies approved by the CNMV, including those specifically referring to incentive plans. Compliance with the code is not compulsory although is a market standard. Non-compliance must be disclosed to the market through the annual corporate governance report.

  13. Are there any prospectus or securities law requirements that apply to the operation of incentive plans?

    Spanish regulations on prospectuses and securities markets include, as an exception to the publication of an issue prospectus or admission to trading, transactions relating to securities which are offered, assigned or that are going to be assigned to current or former directors or employees by the issuer or by a company of the issuer’s group, provided that the aforementioned securities are of the same class as those that have already been admitted to listing on the same market and that a document is available that contains information on the number and nature of the securities and the reasons and details of the offering. Such document in relation to scrip or stock dividend schemes is a far less laborious document than a listing prospectus.

  14. Do any specialist regulatory regimes apply to incentive plans?

    In Spain there are specific regulations in relation to the remuneration of employees or directors of financial institutions, banks, investment services companies, collective investment institution managers and alternative investment managers. This regulation stems from the transposition of European Community standards into Spanish law.

  15. Are there any exchange control restrictions that affect the operation of incentive plans?

    There are exchange control restrictions in incentive plans that affect the operation of incentive plans under Spanish mercantile regulations.

  16. What is the formal process for granting awards under an incentive plan?

    The terms and conditions of the plan must be met by the employee before the start date of the accrual period. The company must ensure that the employee knows, understands and agrees with the terms of the plan. A copy duly signed by them is highly advisable to try to reduce the risk of claims and to reinforce the position of the company in case that the employee alleges lack of knowledge.

    In addition, employee representatives are entitled to issue a non-binding report prior to the company implementing decisions on incentive schemes. The employee representatives must issue the report within 15 days. After this time, the employer has fulfilled the legal requirement regardless of whether the employee representatives finally issue a report.

    In general terms, there is no statutory additional obligations for the implementation of an incentive plan such as to consult either employee representatives or trade unions although collective bargaining agreements can provide that the agreement of the employees' representatives is required if the company implements, modifies or withdraws these plans.

    As rewards under incentive plans are considered salary for all purposes, a withdrawal or change may be considered a substantial change to working conditions. If the change affects a certain number of employees in the company, informing and previously consulting the employees' representatives is compulsory.

  17. Can an overseas corporation operate an incentive plan?

    Considerations from an employment point of view.

    It is lawful to offer an incentive plan operated by the foreign parent company. In this regard, it is possible to offer a share plan for shares in foreign parent companies or a cash incentive plan based on, among other targets, the business performance of the foreign parent company.

    The Spanish subsidiary is responsible for complying with any formal obligations arising from participation in share plans. For example, the subsidiary pays any social security contributions that arise.

    Considerations from a mercantile point of view.

    There are no limitations on the operation of foreign companies in incentive plans under Spanish mercantile regulations. The provisions of this questionnaire will apply to these companies.

  18. Can an overseas employee participate in an incentive plan?

    There are no limitations on the participation of foreign employees in incentive plans under Spanish mercantile/employment legislation.

  19. How are share options or awards held by an internationally mobile employee taxed?

    There are not specific provisions for shares options or awards held by an internationally mobile employee. As a general rule, if the employee is resident in Spain in the tax year in which the taxable income accrues, the relevant income is taxable in Spain. If the employee is not resident in Spain in the tax year in which the taxable income accrues, the relevant income would be taxable in Spain if derives from works performed in Spain.

    As regards Spanish tax residents moving abroad, they could benefit from an annual exemption up to of €60,100.00 on employment income derived from works performed outside Spain provided that the following requirements are met:

    - The employee is tax resident in Spain.

    - The works are effectively performed abroad for a non-resident entity. If the recipient is a related party of the employer, the works shall constitute an intra-group service, producing an advantage or utility to the recipient of those services.

    - The territory in which the services are performed applies a tax similar or equivalent to the Spanish Personal Income Tax and is not regarded as a tax haven. This requirement will be satisfied when the foreign territory has signed with Spain a Double Tax Treaty with a Tax information exchange agreement.

    As regards foreign employees taking up tax residence in Spain, they could benefit from a special tax regime in the tax year of acquisition of the Spanish tax residence and during the following five years provided that the following conditions are met:

    - The employee has not been tax resident in Spain in the previous 10 tax years.

    - The employee initiates a labour relationship with a Spanish company, render services to a Spanish company in the context of a secondment ordered by the foreign employer or become director of an unrelated Spanish entity (participation lower than 25%).

    - The employee does not obtain income which qualifies as being obtained by a permanent establishment in Spain.

    Under this special tax regime, the employee will be taxed on any income from employment at a 24% rate for annual income under €600,000.00 and 45% henceforth.

  20. How are cash-based incentives held by an internationally mobile employee taxed?

    See answer 19.

  21. What trends in incentive plan design have you observed over the last 12 months?

    The following trend can be highlight:

    - Granting share option plan is every day more common to the extent that currently there are more multinational companies in Spain than some years ago.

    - Compensation becomes more aligned with the business strategy in order to involved the employee in the business performance.

    - There is an increasing focus on pay equity and transparency.

    - There is an emergence of new reward approaches in order to adapt the incentive plan to the profile of each employee.

  22. What are the current developments and proposals for reform that will affect the operation of incentive plans over the next 12 months?

    Although legal regulation of employee incentive plans would be advisable, presently only general practice or some case law emerging from claims brought by employees serves as guidance.

    In relation to current legal reforms with implications in the incentive plans, it is worth mentioning that from a tax standpoint, in January 2019 the Spanish Government has sent the draft of 2019 Budget Act to the Congress for debate and approval. As for Personal Income Tax, among others, the Budget increases the tax rates for salary income up to 47% over €130,000 and 49% over €300,000, as well as a 27% increased rate for savings income (e.g. dividends and capital gains) over €140,000.