Producing payroll and payroll simulation

The following is a mere example to show how salaries are calculated and different regulations of some salaries in kind.

For a better understanding you may need to check labour and social security regulations.

Please contact us and we will freely inform you about the best possibilities for your company.

Example:

Employee with the following yearly perceptions.  He is married with two sons aged 3 and 6. His wife does not work.

  • Gross Salary:

    40,000€

  • Car:

    Audi A4 valued in 30,000 €. Employer pays 800€ + 108 € VAT= 908€ per month for the renting.

  • If it is a lease or renting car, the value to be considered as salary in kind is 20% of the total market price of the car. If total cost is 30,000€, salary in kind would be 6,000 € per year. It will then be necessary to consider which percentage is private use and which business use is. In our example we will consider that 50% is company use and 50% business use. Consequently salary in kind will be 30,000*20%*50%= 3,000€
  • Being the business use 50%, only 50% of VAT paid will be deductible for the company VAT purposes. The rest will be deductible but only for corporate tax purposes.
  • Housing:

    9,000 € per year.

  • Taxation on housing has a maximum limit of 10 % of other taxable retribution or 10% of the cadastral value of the house. In our case we will use 10% of other retributions.
  • Ticket restaurant are tax and social security free, up to an amount of 7.81€ per day.
  • Nursery of the youngest son:

    3,000 €. This expenses are tax and social security free under some conditions

  • Schooling of the older son:

    4,000 €. Schooling is considered as salary in kind without special regulations

  • Family Medical insurance:

    1,800 €. It is tax and social security free up to an amount of 500 per member of the family (500*4=2,000 so 1,800 is fully tax free)

  • Accident insurance:

    1,000€.  Accident insurances are tax and social security free.

Withholding tax rate: will depend on family circumstances, age and number of sons, etc.

Withholding tax is calculated over gross cash salary and other taxable salaries in kind in our case.

Social security: standard rate for non-risky activities arises to about 23%. Additionally employee should pay about 4.7%. Maximum Social Security base amounts to 2, 996.16€ per month or 31.824 € per year, whatever the salary is.

Payroll calculation considering taxable salary would be:

Gross cash salary

Car

Housing

Schooling

Total taxable salary

Withholding/advance tax 27%

Social security

Net cash retribution

40,000 €

3,000 €

5,650 €

 4,000 €

62,150 €

  – 16,780 €

– 2,021 €

  31,199 €

Net value of the salary for the employee at market prices

Net salary

Car

Housing

Schooling

Ticket restaurant

Kindergarden

Medical insurance

Accident insurance

Net Value

31,199 €

9,624 €

9,000 €

 4,000 €

 1,500 €

 3,000 €

 1,800 €

 1,000 €

61,123 €

Company cost:

Gross cash salary

Car

Housing

Schooling

Ticket restaurant

Kindergarden

Medical insurance

Accident insurance

Company social security

Total employeer cost

40,000 €

9,012 €

9,000 €

 4,000 €

 1,500 €

 3,000 €

 1,800 €

 1,000 €

10,184 €

  89,496 €

To summarise, total company cost would be 89,496€ while total value received by the employee after taxes would be 61,123€

This example just tries to bring a brief approach of calculations based on standard premises. A final calculation will need a deep study of the circumstances and legal requirements that applies to them.