Agreement between Montero and Díaz so that those earning the minimum wage do not pay income tax this year.

MADRIDWhite smoke. The Minister of Labor, Yolanda Díaz (Sumar), and the Minister of Finance (PSOE), María Jesús Montero, have reached an agreement to adapt personal income tax (IRPF) for workers earning the minimum interprofessional wage (SMI) in 2025, as announced by the Ministry of Labor and confirmed by the Treasury. Finally, minimum wage earners who were affected by this tax (20% of the total) will be able to benefit from a "specific deduction" that will prevent them from having to pay personal income tax. According to the Treasury, this will have an impact of approximately 200 million euros.

Although the Minister of Finance indicated on Thursday that an agreement could be reached soon, Díaz confirmed on Friday morning that the talks had broken down. "Negotiations were underway at 10 p.m. last night, but she [Finance Minister María Jesús Montero] gave the instruction to break off negotiations," Díaz said in an interview on Telecinco. Treasury sources declined to comment in these terms, suggesting only that the positions were "distant." After a race against time, the debate has been resolved.

Specific deduction

The 50-euro increase approved in 2025 leaves the minimum wage at 1,184 euros gross per month in 14 installments, or 16,576 euros gross per year. Until now, with each increase in the minimum wage, the Treasury had increased the minimum exempt from personal income tax, so workers who receive it would not have to pay tax. However, this will not happen in 2025, so the exempt minimum approved in 2024 will remain in place: 15,876 euros per year.

The Ministry of Labor wanted to increase this exempt minimum again, but the Treasury did not. In the eyes of the portfolio headed by María Jesús Montero, this amounts to "stigmatizing taxes." The Treasury is focused on maintaining the minimum wage at 60% of the average salary in the country, so, if the increases continue, not contributing to this tax would put these incomes well above the 60% threshold. As a result, their position was to now decouple these increases in the minimum wage from the minimum wage exempt from personal income tax.

Faced with this shock scenario, however, the Treasury was willing to consider a one-off "compensation," that is, only for 2025, for the affected workers. Therefore, the fact that employees earning this salary do not pay personal income tax does not become a structural deduction, especially if this salary remains in effect. It should be remembered that, with the 2025 increase, not raising this minimum wage would mean that 20% of all workers earning the minimum wage would have to pay taxes: around 500,000 people—single and childless—according to calculations by the commission of experts on the minimum wage. Now, they will be able to benefit from a deduction, the details of which are not yet known.

The negotiations were expected to be concluded this Friday, as this was the deadline for the Treasury to veto the proposals submitted to the Congress of Deputies. Among them was the proposal by Sumar, the minority partner within the Spanish government, to amend the Treasury's decision to introduce the measure to add personal income tax to the minimum wage. Finally, the party led by Yolanda Díaz withdrew its veto after the agreement, and the Treasury vetoed the remaining proposals submitted.