Whether a person works for themselves or as an employee, a tax obligation applies. A new levy beginning in 2023 touches registered workers, Social Security, and the overall take home pay. The measure affects more than 20 million residents of Spain.
What is MEI The new tax starting in 2023
The Intergenerational Equality Mechanism replaces the former Sustainability Factor and is a temporary, contingent step designed to adjust contributions so as to strengthen the pension reserve. It aims to balance the financial effort across generations, safeguarding long term retirement security.
Changes in personal income tax that will affect people earning under 2,500 euros monthly
With an aging population, persistent unemployment, a wave of retirements among the baby boomer generation, and a nearly depleted pension reserve, the government anticipated difficult times for retirement planning. Alongside broader pension reform efforts, the MEI was published in the Official State Gazette last December. This mechanism targets income contributions rather than benefits, and it seeks to modify how the prior Sustainability Factor operated. Unlike that factor, which linked benefits to rising lifespans, the Intergenerational Equality Mechanism activates only when necessary and on a temporary basis.
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How the new Intergenerational Equity Mechanism tax is applied
The MEI does not reduce pension amounts as the abolished Sustainability Factor did. It represents a single new tax shared by all workers, regardless of income, resulting in a uniform salary percentage across the board.
What taxes do I pay now in the province of Alicante
The MEI is introduced as a fresh contribution concept. Individuals registered with SGK will notice a payroll decrease of 0.6 percent. This additional charge affects both the self employment quota and the wages of regular employees.
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The government aims to raise enough funds to cover future pension costs, targeting roughly 22,000 million euros by 2032, at which point the current tax scheme is expected to end.
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How does the new tax affect individuals
The MEI is funded by a deduction of 0.6 percent from workers wages. Employers contribute 0.5 percent, leaving 0.1 percent to be borne by the employee. For self employed groups, unions estimate the average impact at about 5 euros per month.
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For example, a worker with a gross monthly pay of 2,000 euros would see around 12 euros deducted each month for the MEI, with roughly 10 euros paid by the employer and 2 euros by the employee.