The Treasury will enhance the tax deduction in order that recipients of the brand new minimal wage proceed with out paying taxes | Economy | EUROtoday

The Government has confirmed that it’s going to elevate the minimal interprofessional wage (SMI) this yr to 17,094 euros gross per yr in 14 funds, 3.1% greater than in 2025. Once the doubt has been cleared up as to what the quantity of the rise will likely be – a debate that has dragged on for a number of weeks attributable to negotiations between the Ministry of Labor and the social brokers -, the speedy transfer that the Executive is getting ready is the difference of the tax. on earnings to extend, with the purpose that the recipients of the brand new remuneration ground proceed with out paying taxes. The Ministry of Finance was contemplating increasing the present private earnings tax deduction to adapt it to the brand new SMI, as this newspaper reported in December. According to division sources, the choice has already been confirmed and can quickly be authorized by regulation.

The goal of the measure is to totally compensate for the fiscal influence of the rise within the new minimal wage, as occurred final yr. The present deduction, which is 340 euros per yr, is brief and isn’t sufficient to dilute the impact of private earnings tax after the rise, so it will likely be elevated to an quantity barely lower than 600 euros, as confirmed by Treasury sources. The scheme will likely be much like the present one. Workers pays taxes in 2026 by means of the withholdings made by employers and a yr later, when submitting their earnings tax return, they are going to obtain a refund for a similar quantity.

The system chosen by the Government makes it doable to satisfy the dedication that the minimal wage reaches 60% of the typical wage, as established by the European Social Charter, with out the necessity to drive a higher enhance within the gross wage. The focus, on this case, is on the web half, on what actually results in the worker’s pockets.

The cause is straightforward. An enhance within the SMI that started to be taxed would have diminished a part of the wage enchancment. Thus, to offset this impact and successfully attain the 60% threshold in web phrases, the minimal wage must have risen extra. Expanding the deduction makes it doable to keep away from this situation.

In follow, the adjustment is shared between employers and the treasury. Companies assume a extra contained enhance in gross wage, whereas the Administration absorbs a part of the associated fee by means of decrease tax assortment, with an influence that’s estimated at round 200 million euros per yr. The employee, for his half, receives the complete wage enhance. This nuance was essential for the Government, because it supposed to draw employers and obtain their symbolic endorsement. Finally, employers have fallen out of the settlement as a result of lack of indexation of public contracts and the Executive has solely achieved the approval of the unions.

An previous debate

The adaptation of private earnings tax additionally serves to keep away from reopening the battle that broke out a yr in the past between the 2 coalition companions over the taxation of the minimal wage. After the earlier enhance, for the primary time, part of the SMI recipients – primarily single folks with out youngsters who couldn’t profit from the household tax reductions – started to pay private earnings tax month by month, with a invoice near 340 euros per yr between charges and withholdings.

The determination to not adapt the tax to the rise triggered one of many best inside tensions within the legislature in reminiscence. From the financial space of ​​the Government, led by the PSOE, it was argued that, after the gathered will increase lately, the minimal wage ought to start to contribute to public income. On the opposite hand, the Ministry of Labor, within the fingers of Sumar, thought-about it inconsistent to tax those that have been within the lowest wage ranges.

The conflict was resolved with a Solomonic and, in idea, provisional answer: the Treasury would return the quantity paid the next yr, in order that the taxation would don’t have any actual results on the web wage.

Now, with the rise already confirmed for 2026, the Government has determined to keep away from the noise and replicate the identical system. The fee of consultants assembled by Labor had proposed two eventualities. One with a average enhance, as much as 17,094 euros gross per yr, and one other extra bold, as much as 17,360 euros, assuming that the SMI started to pay taxes.

The selection of the primary threshold, accompanied by a deduction of an analogous quantity, makes it doable to neutralize the fiscal influence and meet the wage goal with out the necessity for a higher enhance within the gross wage.