Many employees in Tenerife wonder if money earned from working beyond regular hours has a different tax treatment. However, Hacienda is clear on this: any amount paid by the company to an employee for their activity is considered salary, regardless of whether it corresponds to ordinary or additional hours.
This means that income from overtime does not have a special tax regime; instead, it is added to the total annual earnings. Therefore, the Tax Agency's answer is unequivocal: yes, it must be declared, as it forms part of employment income, just like the base salary or extraordinary payments.
For Hacienda, any amount paid by the company to the worker for their activity is considered salary, regardless of whether it is ordinary or additional working hours.
The most direct impact of overtime is an increase in the annual gross salary, which raises the taxable base for IRPF and, in some cases, may lead to a portion of that income being taxed at a higher bracket. Although this creates the perception that overtime “is taxed more,” it is actually due to the progressive nature of the tax.
A common problem arises when companies do not correctly adjust payroll withholdings. If a worker performs a lot of overtime with a low withholding percentage, it is possible that less than the due amount has been withheld during the year, resulting in a “payable” declaration. Although companies automatically report these payments to Hacienda, experts recommend always reviewing the withholding certificate and comparing it with the draft return to avoid errors.
