What is MEI New tax coming in 2023
Whether someone is self-employed or an employee, a new payment becomes due. A 2023 tax change, the Intergenerational Equality Mechanism, is set to take effect on January 1, 2023. It applies to all registered workers, influencing how salaries are taxed and how much goes toward social security. This measure touches more than 20 million Spanish citizens and aims to reshape the funding of pensions across generations.
The Intergenerational Equality Mechanism explained
The Intergenerational Equality Mechanism replaces the former Sustainability Factor and is designed as a contingent and temporary measure. Its purpose is to recharge the pension system by balancing contributions and pensions so that the burden of financing retirement is shared across generations. In practice, it focuses on income contributions rather than on benefits, and it will activate only when necessary and for a limited period.
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The aging population, ongoing unemployment challenges, the retirement wave from the baby boom generation, and a near-empty pension reserve fund create a tight outlook for retirement funding. The government faces difficult times as it plans how to ensure pension payments in the coming years.
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Alongside other measures that accompany pension reform, the MEI was posted in the official bulletin the previous December. This mechanism targets income through contributions rather than benefits. Unlike the previously repealed Sustainability Factor, the MEI’s application is not tied to increasing lifespans and remains temporary, stepping in only when required to stabilize finances.
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What will the new tax of the Intergenerational Equity Mechanism look like
The MEI does not affect future MEI pensions in January 2023, so the amounts of those pensions are not reduced. However, a new tax is being introduced that all workers will bear, regardless of income level. The pension contribution rate is planned to be uniform, applying equally to everyone, with a shared financial duty among employers and employees.
What taxes do I currently have to pay in the province of Alicante
The MEI will be implemented as a new contribution concept. Workers registered with the social security system will see a small payroll deduction, around 0.6 percent. This extra fee reduces the payroll for both employees and employers and will influence the self-employed quota as well as worker payrolls, creating broader payroll pressure across the system.
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The government aims to raise sufficient funds to cover future pension costs. The plan targets roughly 22,000 million euros by 2032, with the MEI expected to run its course around that time. The goal is to stabilize the pension system by generating a steady revenue stream through the new tax framework.
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Pension impact: How the MEI affects you
The first year of implementation sees a 0.6 percent deduction from workers’ salaries to fund the MEI, starting January 1, 2023. Employers will contribute 0.5 percent, while the remaining 0.1 percent is borne by employees. For self-employed workers, unions estimate that the monthly impact on take-home pay would be around five euros per month on average.
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To put numbers into perspective, a worker earning a gross 2,000 euros would see roughly 12 euros deducted each month for the MEI. About 10 euros of that is paid by the employer and 2 euros by the employee, illustrating the practical effect on monthly take-home pay.