The Ministry of Finance intends to raise the income tax exemption cap to 15,875 euros, so the new 2024 minimum interprofessional wage, set at 1,134 euros for 14 payments, remains free from tax withholdings. The Treasury published a draft royal decree this week detailing this change, along with a higher general deduction for low salaries (up to 19,747.5 euros net) and adjustments to the 2024 income tax return (to be filed in 2025) for the amount required to file, currently 22,000 euros for a single payer or 14,000 euros if income comes from multiple payers.
Calculations from the Register of Tax Consultancy Economists (Reaf), part of the General Council of Economists, indicate that the raised earned-income deduction could save workers around 163.51 euros on the next year’s tax return if their 2024 gross salary matches the interprofessional minimum wage of 15,876 euros. For a gross salary of 18,000 euros the saving would be about 49.30 euros, while at 21,000 euros the benefit could fall to 1 euro.
Reaf notes that the exercise is theoretical, based on standard assumptions and the aligned regional tax rate. The actual impact may vary by locality. Still, the calculations provide a reasonable sense of how the measure might affect workers, as explained by Reaf’s technical secretary, Ruben Gimeno.
The full interprofessional minimum wage will reach workers’ pockets
The exemption threshold is the gross annual salary below which employers are not required to withhold income tax.
Under the Treasury’s proposal, the withholding exemption will rise from 15,000 euros in 2023 to 15,875 euros in 2024. Wages below this threshold, which align with the new minimum wage, will be paid to workers without any tax deduction.
The lowest salaries will face a smaller tax bite
The decree also lowers the withholding for net salaries up to 19,747.5 euros. This is not a fixed amount; it follows a mathematical formula.
Lower wages will pay less tax
In addition to reducing the withholding for the lowest wages, the treasury plans to lift the deduction that applies on income tax returns for the same group. This means smaller tax payments when returns are filed next year.
Specifically, workers whose net salary in 2024 is at or below 14,852 euros will be eligible for a general labor income deduction of 7,302 euros when filing their 2024 return in 2025, up from 5,565 euros for net salaries up to 13,115 euros in 2023.
The earned-income deduction ranges from 7,302 euros for net salaries up to 14,852 euros, down to 0 euros for net salaries up to 19,747.5 euros, in line with the established formula.
The same applies to retirement incomes
The tax rules affecting salaries also apply to pensions, with similar implications.
Changes reflected in January pay slips and the 2025 return
The draft decree notes that lower payroll withholding will appear on January pay slips, or by February at the latest, with retroactive effect from January 1.
The increase in the general deduction for labor income for salaries below 19,747.5 euros will be most visible in 2025 as the 2024 income tax return is filed. The new cap will show a lower withholding tax for net salaries, ranging from 15,875 euros for gross salaries up to that amount (zero withholding) to 19,747.5 euros.
The threshold for mandatory income tax filing will also be updated for 2025. The 2023 filing campaign set the limit at 22,000 euros for a single taxpayer or 14,000 euros for multiple earners, with the remainder exceeding 1,500 euros per year.