Navigating the Complexities of Spanish Income Tax (IRPF) in 2024
The landscape for workers in Spain is becoming increasingly challenging, leading to heightened frustration and a decline in personal satisfaction as the cost of living rises and taxes continue to escalate. The absence of electoral considerations in 2024 may explain the lack of government efforts to reduce the income tax burden on each payslip.
Key Changes for 2024
The upcoming tax season for the declaration of income tax (IRPF) commences on April 3, focusing on the fiscal year 2023. Individuals earning between 22,000 and 35,000 euros will be affected, with the Tax Agency expected to refund between 400 and 900 euros to citizens within this income bracket. However, the exact refund amount will vary based on each taxpayer’s circumstances, including the presence of dependents or a non-earning spouse.
Considering the modification to the IRPF regulations by the Government in 2022, approved by the Ministry of Finance, a reduction in IRPF withholding tax from 22,000 euros upwards was anticipated, impacting the tax declaration for the year 2023. However, a surprising turn of events may unfold, as the tax withholdings made by employers on workers’ salaries were lower than expected.
This discrepancy will result in a higher fiscal adjustment that taxpayers must make to settle the shortfall in taxes owed to the Tax Agency for the previous fiscal year. Consequently, individuals situated at the lower end of the income bracket (22,000 euros) and those with family responsibilities will bear the brunt of this adjustment. Conversely, individuals without dependents and closer to the maximum income of 35,000 euros will be less affected.
With higher withholding, some taxpayers may find themselves with no additional tax liability for the current fiscal year. This adjustment primarily affects salaried employees with a single employer earning over 22,000 euros annually and those with two employers earning over 14,000 euros, i.e., if the income from the second employer exceeds 1,500 euros.
IRPF Income Brackets for 2024
Both employees and self-employed individuals will encounter the following income tax brackets:
- From 0 to 12,450 euros: 19% (9.5% state rate and 9.5% regional rate).
- From 12,450 to 20,200 euros: 24% (12% state rate and 12% regional rate).
- From 20,200 to 35,200 euros: 30% (15% state rate and 15% regional rate).
- From 35,200 to 60,000 euros: 37% (18.5% state rate and 18.5% regional rate).
- From 60,000 to 300,000 euros: 45% (22.5% state rate and 22.5% regional rate).
- Above 300,000 euros: 47% (24.5% state rate and 22.5% regional rate).
Government’s New Measure
The Government, following approval by the Council of Ministers, has introduced a Royal Decree amending the IRPF Regulations, as established by Royal Decree 439/2007 of March 30. This decree aims to provide relief to low and middle-income earners, compensating for the increase in the Minimum Interprofessional Wage (SMI), which rose by 5% to 1,134 euros.
The proposed regulation from the Ministry of Finance raises the minimum amount for withholding taxes on IRPF, extending it from 14,000 euros to 15,000 euros last year. Now, it will be further extended to 15,876 euros, equivalent to the annual SMI for 2024. However, the reduction in IRPF withholdings will benefit a broader range of individuals, including those with incomes up to 22,000 euros.
According to the Government, the reduction in IRPF withholdings will benefit 5.2 million taxpayers, particularly low and middle-income earners, resulting in savings of 1,385 million euros. The Government asserts that this measure aligns with its progressive tax policy, aiming to alleviate the tax burden on low-income earners while calling for greater contributions from high-net-worth individuals and multinational corporations.
Exemptions from Tax Declaration
It’s important to note that individuals may still opt to file a tax declaration even if they are not obligated to do so, particularly if they anticipate a refund. In such cases, the Tax Agency would reimburse any excess taxes withheld, even if there is no legal obligation to file a declaration.
Additionally, deductions applicable in the current tax season will include incentives for purchasing plug-in electric vehicles, installing charging infrastructure, and undertaking home renovations to enhance energy efficiency.