Introduction: The year 2024 brings complexities for Spanish workers, leading to increased frustration and decreased personal satisfaction as the cost of living rises alongside escalating taxes. It appears that the absence of electoral activities this year might be the reason why the government is not working to reduce the Income Tax (IRPF) burden on each payslip.
Key Changes for 2024: The upcoming Income Tax Return campaign, starting on April 3, will cover the fiscal year 2023. It affects individuals earning between €22,000 and €35,000, with the Tax Agency expected to refund between €400 and €900 to citizens within this income bracket. However, the refund amount varies based on each taxpayer’s circumstances, with lower deductions for each child or if the spouse has no income.
Considering the amendment to the Income Tax Regulation by the Government in 2022, approved by the Ministry of Finance, a reduction in IRPF withholding from €22,000 onwards was anticipated, impacting the 2023 tax declaration. However, unexpected changes may occur now as the income tax withholdings made by employers were lower than expected.
This implies a larger fiscal adjustment for taxpayers to compensate for the underpaid taxes from the previous year. Consequently, those at the lower end of the income range (€22,000) and those with family responsibilities are most affected. Conversely, individuals without dependents nearing the maximum threshold of €35,000 are less affected.
With higher withholdings, some individuals may end up owing nothing to the Tax Agency for the current fiscal year. Consequently, adjustments will apply primarily to employees with a single payer earning over €22,000 annually and those with dual payers earning over €14,000, i.e., if the second payer provides more than €1,500.
IRPF Tax Brackets in 2024: Both employees and self-employed individuals face tax brackets as follows:
- From €0 to €12,450: 19% total (9.5% state rate + 9.5% regional rate)
- From €12,450 to €20,200: 24% total (12% state rate + 12% regional rate)
- From €20,200 to €35,200: 30% total (15% state rate + 15% regional rate)
- From €35,200 to €60,000: 37% total (18.5% state rate + 18.5% regional rate)
- From €60,000 to €300,000: 45% total (22.5% state rate + 22.5% regional rate)
- Over €300,000: 47% total (24.5% state rate + 22.5% regional rate)
Government’s New Measure: Following approval by the Council of Ministers, the Government has introduced a Royal Decree amending the IRPF Regulation, approved by Royal Decree 439/2007 of March 30. This decree aims to provide relief for low and middle-income earners to offset the increase in the Minimum Interprofessional Wage (SMI), raised by 5% to €1,134.
The proposed regulation increases the minimum amount for IRPF withholdings from €14,000 to €15,000, expanded further to €15,876, equivalent to the annual SMI for 2024. However, the reduction in IRPF withholdings affects a broader range of incomes, extending up to €22,000.
According to the Government, the reduction in IRPF withholdings will benefit 5.2 million taxpayers, particularly low and middle-income earners, saving them €1.385 billion. The Government asserts that this is central to its progressive fiscal policy, aiming to ease the tax burden on lower-income earners while expecting greater contributions from high net worth individuals and multinational corporations.
This includes raising the IRPF for capital incomes exceeding €200,000, creating a Financial Transactions Tax, levies on banks and energy companies, the Solidarity Tax on Large Fortunes, and a minimum 15% corporate tax rate for multinationals.
Who Is Not Obligated to File a Tax Return? This does not exempt individuals from filing if they expect a favorable outcome (“Refundable”), allowing Hacienda to refund any overpaid amounts, even if there is no obligation to file.
It’s essential to consider that purchasing plug-in electric vehicles, installing charging infrastructure, and home improvements for energy efficiency will be key aspects generating applicable deductions in the ongoing campaign.