Congress unravels the mess: the minimum wage will not cover personal income tax.
PSOE, Sumar, and the BNG are taking advantage of an insurance law to include an amendment that exempts the lowest incomes from paying taxes.
BarcelonaCorrection: the minimum wage (SMI) will not be subject to income tax (IRPF), as initially planned by the Ministry of Finance after the latest increase, something that was later corrected. The Congress's Economic Commission approved this Tuesday the law on civil liability and insurance in the circulation of motor vehicles, a text in which the PSOE, Sumar, and BNG introduced an amendment to exempt those earning the SMI from income tax and correct an error that prevented at least 20% of this group from doing so.
The PP, which had previously criticized the Treasury's decision to tax the new minimum wage, abstained, and Vox voted against. In addition to the sponsors of the amendment, the PNV, Bildu, and ERC also voted in favor.
This initiative resolves the error that prevented that some minimum wage earners would benefit from the option of not paying taxes, once the First Vice President and Minister of Finance, María Jesús Montero, and the Second Vice President and Minister of Labor, Yolanda Díaz, agreed to be released. In fact, this aspect caused strong tension between the Spanish government partners until an agreement was reached between Montero and Díaz, which resulted in a deduction that subsequently had to be corrected.
The Spanish government had designed a deduction for next year to reimburse minimum wage earners who had to pay personal income tax in 2025 through the withholdings made. But the problem is that it only affected the state portion of the rate and not the regional portion, meaning some minimum wage earners would end up paying. The amendment introduced last April to the same vehicle insurance law only modified Article 68 of the Personal Income Tax Law, which allowed the deduction to be applied to the state portion, but forgot to make changes to Article 77 to also affect the regional portion.
In the Senate
Now, this text will not have to go to the full Congress and will be sent directly to the Senate. The bill's main objective is to extend the obligation to have insurance on agricultural or industrial vehicles and includes a measure to deduct up to 340 euros from the minimum wage in the annual personal income tax return.
The Nationalist Nationalist Party (BNG) joined the amendment by the PSOE and Sumar to establish that the deduction must be assumed solely by the State and to increase the amount from 17,256 euros to 18,276 euros.
The deduction will be 340 euros per year when income is below the minimum wage of 16,576 euros and will be reduced slightly to 18,276 euros, i.e., it will be gradual. In fact, the difference between gross earned income and annual income of 16,576 euros should be subtracted from the 340 euros by 0.2. In any case, this group must file an income tax return to qualify for the deduction, even if they do not reach the minimum annual income required to do so (22,000 euros).
The law also includes a reform that will allow retired mutual fund members to return the personal income tax they overpaid in a single payment this year, which was recognized by the Supreme Court. This granted them the four-year period currently stipulated by law.