[Spain] Minimum wage workers to pay income tax for first time

Spain’s minimum wage workers are due to earn €700 more this year after the threshold was raised, however, a discrepancy between government ministries means some of these workers will now have to pay €300 of their extra earnings back in income tax, The Local reports.

On February 11, the country's minimum wage or SMI (Salario Mínimo Interprofesional) was increased by €50 per month, up to €1,184 across 14 payments.

The rise reportedly means many of these low-income workers will now earn enough to pay income tax (IRPF) for the first time.

Until now, Treasury was changing the threshold in line with the minimum wage increase so these workers would remain exempt from paying income tax. This time it has taken the decision not to.

A report from the commission of experts studying the effects of the minimum wage increase reportedly found that the discrepancy will affect approximately 20 per cent of those who earn the SMI.  

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 those affected 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 now pay €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 per cent.

The income tax novelty will not affect everyone equally. For example, someone who earns the minimum wage and has a partner and one child over three years old will have a withholding of €99 per year.

However, 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 per cent of those who earn the minimum wage are still free from having to file income tax returns because their exempt minimum increases due to deductions for caring for others, such as children or elderly parents.

Source: The Local

Spain’s minimum wage workers are due to earn €700 more this year after the threshold was raised, however, a discrepancy between government ministries means some of these workers will now have to pay €300 of their extra earnings back in income tax, The Local reports.

On February 11, the country's minimum wage or SMI (Salario Mínimo Interprofesional) was increased by €50 per month, up to €1,184 across 14 payments.

The rise reportedly means many of these low-income workers will now earn enough to pay income tax (IRPF) for the first time.

Until now, Treasury was changing the threshold in line with the minimum wage increase so these workers would remain exempt from paying income tax. This time it has taken the decision not to.

A report from the commission of experts studying the effects of the minimum wage increase reportedly found that the discrepancy will affect approximately 20 per cent of those who earn the SMI.  

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 those affected 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 now pay €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 per cent.

The income tax novelty will not affect everyone equally. For example, someone who earns the minimum wage and has a partner and one child over three years old will have a withholding of €99 per year.

However, 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 per cent of those who earn the minimum wage are still free from having to file income tax returns because their exempt minimum increases due to deductions for caring for others, such as children or elderly parents.

Source: The Local