Whether you are self-employed or an employee, a payment is due. This is about a new tax for 2023, commonly referred to as the Intergenerational Equality Mechanism (MEI). It is a tax that all registered workers and those contributing to Social Security will feel, and it will influence salary percentages. This measure affects more than 20 million people in Spain.
What is MEI? A new tax coming in 2023
The Intergenerational Equality Mechanism replaces the old Sustainability Factor and is designed to be contingent and temporary. This tax aims to replenish the pension system by sharing the financing burden more evenly across generations, ensuring a healthier balance over time.
Changes in personal income tax that will be noticeable for anyone earning less than 2,500 euros per month
With the aging population accelerating, high unemployment levels, the retirement of the baby boomer generation, and a depleted pension reserve fund, the Government anticipates difficult times for retirement planning. The MEI is part of a broader pension reform that shifts focus to contributions rather than benefits. Unlike the former Sustainability Factor, which tied benefits to life expectancy, the Intergenerational Equality Mechanism is designed to be activated only when necessary and for a limited period.
How is the new Intergenerational Equality tax structured?
MEI does not reduce pensions, so the pension amounts remain intact, unlike the dismantled Sustainability Factor. It represents a new contribution that affects all workers, regardless of income. In practical terms, the payroll deduction percentage is uniform across earners.
What taxes do I currently have to pay in the province of Alicante?
The MEI is implemented as a new contribution category. Those registered with SGK will notice a 0.6% reduction in payroll, representing an additional levy on both self-employed workers and salaried employees. Employers and workers share the cost, which places pressure on the self-employment quota as well as on overall payroll calculations.
This is the amount you can claim to delay retirement age.
The Government is aiming to secure sufficient funds to cover future pension costs. The plan targets roughly 22,000 million euros in additional revenue by 2032, at which point the tax scheme is expected to wind down.
Announcement for freelancers: Key dates regarding the new contribution system.
How does the new tax affect individuals?
To fund the MEI, a 0.6% deduction will be taken from workers’ gross wages. Employers will contribute 0.5% of this amount, with workers covering the remaining 0.1%. For self-employed unions, industry estimates suggest the average monthly cost may be around 5 euros.
The viral reaction of the teenager who saw his remaining salary after paying taxes
To illustrate, for a worker earning a gross salary of 2,000 euros, the MEI would amount to about 12 euros per month. Of this, the employer would bear roughly 10 euros, and the employee would pay around 2 euros.