The First Vice Presidency is finalizing an increase in the exempt minimum in personal income tax to match the increase in the Minimum Interprofessional Salary (SMI) agreed to be 5% for 2025. Sources from the Ministry of Finance report that the threshold will be updated in an upcoming decree, in absence of a Budget law, after the president of the PP, Alberto Núñez Feijóo, denounced this morning that the Tax Agency and Social Security would keep almost half of the increase agreed between the Government and unions.
In the current General State Budgets, those for 2023 extended to 2024, taxpayers who received the minimum wage were not required to declare, but in most cases, the excess over 15,000 euros gross was withheld. A taxpayer who earned the SMI was usually paying around 0.25%.
However, the leader of the main opposition party has denounced that, after the update of the SMI agreed last week, a full-time worker would earn 15,876 euros per year in 2024, which represents a salary increase of 756 euros. Of this increase, withholdings would remain at 338 euros, 44% of the increase.
Treasury sources report that “the Government, whenever the SMI has increased, has accompanied the measure with modifications to the Personal Income Tax to avoid an excessive impact on withholdings” for the lowest salaries. They add that this time will not be an exception. They aim for an increase in this exempt minimum of around 5%, in line with the increase in the minimum wage.
Changes in withholdings can be approved via Budget law or via decree. The Government has not yet decided whether this change to align taxes with the increase in the SMI will be included in the SMI decree itself or will be approved in parallel. What the Treasury is clear about is that the update will come into force before the end of January so as not to cause a negative impact on contributions for the first month of the year.
The president of the PP, Alberto Núñez Feijóo, denounced that "it is not acceptable that almost half of the increase in workers' salaries, paid by companies, is kept by the State." The Treasury replies that when the PP governed "a worker who earned 15,876 euros a year paid 1,111 euros in personal income tax withholdings. In 2023, this same taxpayer paid 325 euros in withholdings, 70% less than with the PP. And in 2024 he will pay taxes even less when the personal income tax regulations are updated to the new increase in the SMI".
At the end of November 2023, the change in the minimum income tax exemption, as well as the deductions applied in the autonomous communities, subtracted 1,677 million from the collection, according to the latest report from the Tax Agency.
