Whether someone is self-employed or an employee, a payment is required. a new tax in 2023 is being discussed, focused on the Intergenerational Equality Mechanism (MEI). This measure, applicable to registered workers and the Social Security system, involves a salary percentage and affects over 20 million Spanish citizens.
What is MEI? New tax coming in 2023
The Intergenerational Equality Mechanism replaces the former Sustainability Factor. It is designed to be contingent and temporary, with the aim of replenishing the retirement fund through a fairer distribution of effort to finance pensions across generations.
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With aging populations rising, ongoing unemployment, and many Baby Boomers nearing retirement, the pension reserve fund is under pressure. The government anticipates challenging times for retirement, which has driven attention to potential reforms. Alongside other pension reform measures, the MEI is described in official notes as a mechanism that targets income (contributions) rather than benefits (expenses). Unlike the older Sustainability Factor, which tied benefits to life expectancy, the MEI is designed to activate only when needed and to end when its purpose is fulfilled. It operates as a temporary, adjustable adjustment to financing pensions, not a permanent change to benefits.
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How is the new Intergenerational Equity Mechanism tax structured?
The MEI does not reduce pension amounts; pensions remain intact despite the new tax. It represents a universal contribution borne by all workers, regardless of income, resulting in a percentage deduction from salaries that is the same across the board. In practice, this means the net pay for workers will reflect a fixed contribution rate rather than a means-tested benefit change.
What taxes apply now in the province of Alicante?
The MEI is introduced as a new contribution concept. Individuals registered with the social security system will notice a payroll decrease of about 0.6 percent. This additional deduction adds pressure on both the self-employed quota and the payroll for salaried workers.
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In essence, the government seeks to raise sufficient funds to cover future pension costs. The plan aims to generate roughly 22 billion euros by 2032, at which point the new tax framework is expected to phase out.
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How does the new tax affect individuals?
To fund this new measure, a 0.6 percent deduction will be applied to workers’ wages. Employers are responsible for 0.5 percent of this amount, while employees cover the remaining 0.1 percent. For self-employed unions, estimates show an average monthly impact of around 5 euros.
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For instance, with a gross salary of 2,000 euros, the MEI would translate to about 12 euros per month in deductions: the employer contributing roughly 10 euros and the employee about 2 euros.