Spain's minimum wagers to pay income tax for first time due to salary rise
On Tuesday February 11th, Spain's minimum wage or SMI (Salario Mínimo Interprofesional) was increased by €50 per month, up to €1,184 across 14 payments.
However, this also means many of these low-income workers will now earn enough to pay income tax (IRPF in Spanish).
Up until now, the Treasury had been changing the threshold in line with the minimum wage increase, so that these workers would be exempt from paying income tax. But this time it has decided not to.
According to a report of the commission of experts studying the effects of the increase in minimum wage, this discrepancy will affect approximately 20 percent of those who earn the SMI.
Out of the almost two and half million people in Spain who earn minimum wage, approximately half a million will now have to pay income tax.
The majority of these are single people without children to care for. Many are also young and in their first jobs. Without applicable tax deductions for caring for relatives for example, they will end up paying €300.05 per year in tax or €21.40 per month, across 14 payments.
This means their personal income tax withholding rate would be around two percent.
So, for the extra €700 they'd earn per year, they would have to pay approximately €301 in taxes, leaving them with only a rise of €399 instead.
However, this income tax novelty will not affect everyone equally. For example, someone who earns the minimum wage, has a partner and one child over three years old will have a withholding of €99 per year.
But a taxpayer with a partner and a child under three years of age will not have any income tax withholding because of the deductibles.
The remaining 80 percent of those who earn minimum wage are still free from having to file income tax returns, because their exempt minimum increases due to deductions for caring for other people such as children or elderly parents.
Not everyone in the government is happy about the decision and it has been causing a rift between the coalition parties in power.
Hard-left Sumar, headed up by Spain's Minister of Labour Yolanda Díaz, is disappointed by Treasury Minister María Jesús Montero's reluctance to adjust the income tax threshold.
'Tax justice starts at the top, not at the bottom,' Díaz said.
She accused Pedro Sánchez's Socialists of 'having just given a tax gift to the financial experts in Spain', alluding to the fact that minimum earners will need the help of accountants, tax advisors and law firms to file their income tax return.
Sumar's parliamentary spokesperson Verónica Martínez has already said that they will appeal the bill in Congress so that minimum wage earners won't have to pay any income tax as has been the case until now.
'For our part, we will exercise our parliamentary autonomy to present a bill that guarantees that the SMI is exempt from personal income taxation,' she confirmed.
Since Pedro Sánchez gained power in 2018, the SMI has increased by 61 percent. After these successive increases, the minimum wage has been reaching more and more people, now around 2.5 million workers, according to calculations by Spain's Ministry of Labour.
This adds up to almost 13 percent of the country's workforce, and one of the reasons the ruling PSOE now want these people to start paying income tax.
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