Spain to cut income tax for workers who earn up to 21,000 euros

The Spanish central government announced on Thursday a package of tax measures to deal with the damage that soaring inflation is wreaking on families and businesses.

As explained by the Minister of Finance, María Jesús Montero, the plan includes a reduction in personal income tax (IRPF) that will benefit those workers who earn up to 21,000 euros gross per year.

"It is not an amount chosen at random: the median salary (in Spain) is around 21,000 euros", added the boss of the Treasury.

And those who earn less than 15,000 euros gross per year will be exempt from paying personal income tax (previously, the exemption was for incomes up to 14,000 euros).

The self-employed (autonomos) will benefit from an additional 5% reduction in net income in the simplified scheme (módulos) and, in the simplified direct estimate, from an additional deduction of two points up to 7% in expenses that are difficult to justify.

Montero has expressly insisted on disassociating these tax benefits from the "deflations" announced by various regional governments, among which he mentioned those of "Madrid or Andalusia", since those are universal, while the measure announced by the central government exclusively benefits half of the population with lower incomes.

“We are not going to touch the income tax brackets or rates, but to expand the benefits that these incomes already have”, said the minister.

In addition, the coalition government (PSOE-Podemos) chaired by Pedro Sanchez will create a new so-called "solidarity tax" for the richest, which will be in force in 2023 and 2024 and will be paid by taxpayers with assets of more than three million euros. With this new tax, the Ministry of Finance plans to collect around 1,500 million euros, from 23,000 large taxpayers.

Capital tax

According to the Minister of Finance, the tax on capital income of more than 200,000 will be raised by one percentage point, from 26 to 27%, and to 28% if the income is more than 300,000 euros.

A temporary increase in corporate tax for large companies will also be approved.

Until now, the Spanish central government had been opposed to tax cuts and had only offered to create a new tax on large fortunes. However, in recent days, after several regional governments -among them that of the Valencian Community, governed by the PSOE- announced reductions in personal income tax, the executive headed by Pedro Sanchez has opened up to approving its own tax reductions, although focused on the population with lower incomes.