Are the savings I see in Cobee real?

In these paragraphs we are going to explain how we calculate savings and why they often do not correspond to the withholding you see in your payroll.

It may surprise you to see that the savings percentage you see in Cobee is higher than the IRPF figure you see in your payroll. But don't worry, it's still just as real. 

An approximation of the IRPF

The IRPF tax (Personal Income Tax) in Spain follows a progressive process: the higher the gross salary, the higher the percentage of tax to be paid.  As it is progressive, you will most likely be taxed in several brackets within the same tax return, as the percentage to be paid for each bracket is satisfied. 

*Table for general situations in the common territory subject to special features

For example, for a gross amount of €25,000, is the IRPF 30%?

Not exactly. Although 30% is the final bracket, this percentage will only be paid for the amount within that bracket.

This will be the way in which it will be taxed following the logic of evolution over the brackets:

• From €0 to €12,450 the 19% bracket is applied.
  From €12,450 to €20,200 the 24% bracket is applied.
  From €20,200 to €25,000 the 30% bracket is applied.

The calculation of the IRPF is made taking into account the rate applied as we earn more and jumping in the brackets. The percentage of the last bracket in which we are placed will be our Marginal Personal Income Tax.

So, where does the IRPF come from in my payroll?

The amount you see as IRPF in your payroll is not an exact tax payment, but an approximate withholding made by our company. The calculation of the final amount to be paid will not be seen until next year's income tax return, where it will be calculated whether or not the amounts withheld coincide with what we have to pay to the Treasury.

When you look at your payroll, you will see that only one percentage is used for the IRPF calculation, but that does not mean that the aforementioned brackets are not being taken into account. The average personal income tax rate is used for payroll calculations. The average rate is a single percentage that when applied to the total salary is equivalent to applying the different tax brackets. For example, for the example of €25,000 above, the average rate would be 22.66%* (excluding personal minimums and reductions/deductions).

Why is the saving I see in Cobee not the same as the one I see in my payroll?

Through flexible remuneration and Cobee, the consumption you make will no longer be used for the calculation of taxes (as they are tax-exempt products). The good thing is that this consumption occurs from the top to the bottom of the salary. What does that mean? That means that you start consuming the highest bracket, which is the part to which the marginal rate applies (our highest rate).

However, in the payroll we apply a calculation based on the average rate and this means that the savings shown in the payroll are calculated on the basis of the average rate and not on the basis of the marginal rate (which would be the real savings). For this reason, the savings shown in the payroll will only be a part of the total that will be obtained in the income tax return at the end of the year.

If we remember the brackets for a salary of 25.000€, and we take into account the highest one, we will be able to see the difference between calculating the savings with an average IRPF or with the Marginal IRPF:

• For a salary of €25,000: If we consume 1,000€ of flexible remuneration and apply the average rate of 22.66% = 1,000€ x 22.66%= 226.6€ of savings.*.
• For a salary of €25,000: If we consume €1,000 of flexible remuneration and apply the marginal rate of 30% = €1,000 x 30% = €300 savings.* For a gross salary of €25,000: €1,000 x 30% = €300 savings.

This is repeated for any gross salary:

• If a person has a gross annual salary of €20,000* his savings will be calculated with respect to the 24% withholding which is his marginal rate (until the entire tranche is consumed and the marginal rate changes).
• If a person has a gross annual salary of €28,000* his savings will be calculated with respect to the 30% withholding tax, which is his marginal rate. 

In conclusion

The savings you see in your app, although subject to special conditions, are real. It is applied to every purchase you make on products included in Cobee and generates significant savings. However, you don't see its impact on your payroll month by month.

*All explanations are generic and simplified for ease of understanding: They do not take into account all the factors that affect the gross of a salary.

**There are cases in which the savings shown in Cobee are not approximate: Special tax situations such as capital losses, changing companies in the middle of the fiscal year or receiving other income that does not come from work.