Whether someone is self-employed or an employee, a payment is required. A new tax started in 2023, known as the Intergenerational Equality Mechanism MEI. From January 1, 2023, it affects all registered workers and Social Security, and it outlines how the salary percentage will be adjusted. The measure reaches more than 20 million Spanish citizens.
What is MEI? A new tax arriving in 2023
The Intergenerational Equality Mechanism replaces the former Sustainability Factor and is described as contingent and temporary. The purpose of this tax is to recharge the pension system through a balanced distribution of effort to finance pensions across generations.
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In addition to other reform measures, the MEI was published in the official state bulletin last December. This mechanism focuses on income through contributions rather than benefits. Unlike the previously repealed Sustainability Factor, the Intergenerational Equality Mechanism activates only when necessary and on a temporary basis.
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What will the new Intergenerational Equality Mechanism tax look like?
It will not affect MEI pensions in January 2023, so their amounts will not be reduced, unlike the abolished Sustainability Factor. The new tax is a payroll deduction shared by all workers regardless of income. The percentage of salary affected will be uniform across earners.
What taxes do I currently owe in the province?
This tax is introduced as a new contribution concept. People registered with social security will see a payroll decrease of 0.6 percent. This additional contribution will affect both the self-employed quota and employee payrolls.
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The government aims to raise sufficient funds to cover future pension costs. The target is to accumulate about 22 billion euros by 2032, at which point the new tax scheme is planned to conclude.
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How will the new tax affect individuals?
A 0.6 percent deduction will be taken from workers salaries to fund the MEI, effective January 1, 2023. Employers will contribute 0.5 percent, while workers cover the remaining 0.1 percent. For self-employed groups, unions estimate an average monthly impact of around five euros.
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To put numbers in perspective, a worker with a gross salary of 2000 euros would see about 12 euros deducted each month for the MEI, with roughly 10 euros paid by the employer and 2 euros deducted from the employee’s paycheck.