The small change to Spain’s income tax you should be aware of
A small change to the amount of tax withheld from some salaries in Spain could have an impact on annual tax rebates.
For some people in Spain, their January pay cheque might have been a little more than they were expecting.
The reason for this is a technical adjustment introduced at the end of 2022 to Spain's IRPF (income tax) rules that have reduced the withholding on earned income for certain thresholds. Withheld income is the amount held back from your pay packet in order to pay taxes.
READ ALSO: The tax changes in Spain in 2023 that you need to know about
As a result, the January net salary of those affected (and generally moving forward) by the changes was boosted slightly, but it also has consequences for their 2024 tax return, namely that their 2024 tax rebate will be lower.
José María Mollinedo, General Secretary of the Sindicato de Técnicos del Ministerio de Hacienda (Gestha), told Spanish news outlet 20minutos that "those affected who file their income tax return in 2024, will receive a lower amount back".
In September, the Spanish government announced an extension of personal income tax benefits for lower-income thresholds.
Not only did it raise the base minimum tax exemption from €14,000 to €15,000, but it also extended reductions for incomes of up to €21,000, which was previously €18,000. On top of that, there were also changes to IRPF regulations that adjusted how much incomes above that figure would be taxed, with the aim of alleviating a big-scale jump.
READ ALSO: The new tax all workers in Spain will pay in 2023
According to Gestha's calculations, the main beneficiaries will be taxpayers or households with a monthly income of less than €1,500. In these circumstances, income between €23,000 and €28,500 will have the amount withheld, reduced by between €1,014 and €27, depending on the exact level of income and the number of dependent children they have.
This effectively means more money upfront for low earners.
2024 rebates
However, it does mean that their 2024 tax returns will be slightly lower. Incomes of between €23,000 and €28,500 will be refunded between €286 and €1,452, again depending on the number of dependents and exact income, a lower amount than last year's tax return.
"This reduction in withholding is the same amount that will be reduced when they file their tax return, but they will still receive a refund," Mollinedo clarified.
It should be noted that these adjustments do not affect incomes of less than €21,000, where the new limit on the deduction for earned income has been established, because the changes are to the tax itself, the tax thresholds have not changed.
For incomes from €21,000 there is now "lower withholding but not lower taxation means that this there will be a lower amount to be returned" than in previous tax rebates, Mollinedo says.
If you have a salaried job in Spain, it is worth noting that there may be variations in the exact withholding calculations due to the differences in regional regulations and tax rates.
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For some people in Spain, their January pay cheque might have been a little more than they were expecting.
The reason for this is a technical adjustment introduced at the end of 2022 to Spain's IRPF (income tax) rules that have reduced the withholding on earned income for certain thresholds. Withheld income is the amount held back from your pay packet in order to pay taxes.
READ ALSO: The tax changes in Spain in 2023 that you need to know about
As a result, the January net salary of those affected (and generally moving forward) by the changes was boosted slightly, but it also has consequences for their 2024 tax return, namely that their 2024 tax rebate will be lower.
José María Mollinedo, General Secretary of the Sindicato de Técnicos del Ministerio de Hacienda (Gestha), told Spanish news outlet 20minutos that "those affected who file their income tax return in 2024, will receive a lower amount back".
In September, the Spanish government announced an extension of personal income tax benefits for lower-income thresholds.
Not only did it raise the base minimum tax exemption from €14,000 to €15,000, but it also extended reductions for incomes of up to €21,000, which was previously €18,000. On top of that, there were also changes to IRPF regulations that adjusted how much incomes above that figure would be taxed, with the aim of alleviating a big-scale jump.
READ ALSO: The new tax all workers in Spain will pay in 2023
According to Gestha's calculations, the main beneficiaries will be taxpayers or households with a monthly income of less than €1,500. In these circumstances, income between €23,000 and €28,500 will have the amount withheld, reduced by between €1,014 and €27, depending on the exact level of income and the number of dependent children they have.
This effectively means more money upfront for low earners.
2024 rebates
However, it does mean that their 2024 tax returns will be slightly lower. Incomes of between €23,000 and €28,500 will be refunded between €286 and €1,452, again depending on the number of dependents and exact income, a lower amount than last year's tax return.
"This reduction in withholding is the same amount that will be reduced when they file their tax return, but they will still receive a refund," Mollinedo clarified.
It should be noted that these adjustments do not affect incomes of less than €21,000, where the new limit on the deduction for earned income has been established, because the changes are to the tax itself, the tax thresholds have not changed.
For incomes from €21,000 there is now "lower withholding but not lower taxation means that this there will be a lower amount to be returned" than in previous tax rebates, Mollinedo says.
If you have a salaried job in Spain, it is worth noting that there may be variations in the exact withholding calculations due to the differences in regional regulations and tax rates.
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