Minimum wage goes up in Spain, but so does income tax
Many employees in Spain will end up paying half of what they’ve gained in taxes
The battle lines were drawn months ago and low-income employees have finally had the good news they’ve been waiting for – the minimum wage is going up to 1,184 euros over 14 monthly payments. But it’s something of a double edged sword, as for the first time in Spanish history, these lowest annual salaries will be subject to tax.
Essentially, the Minimum Interprofessional Wage (SMI) has been increased by 4.4%, which means that minimum wage employees will receive an extra 50 euros per month, or 700 euros per year. The wage hike, which was championed by Minister of Labour Yolanda Díaz, will impact around 2.5 million people.
From February 12, but with retroactive effect from January 1, the lowest income for carrying out a full-time job is set at 16,576 euros gross per year.
“Today we take a historic step in this new increase in the minimum wage,” Ms Díaz said, pointing out that since 2018, the Spanish government has raised the base salary by 61%.
“It suits Spain very well to raise the SMI. In contrast to everything that has been written and reproduced, raising the minimum wage is not a threat to Spain, but the best way for the country to move in the right direction. The history of the SMI in our country is a success story,” she added.
However, her triumph quickly turned to disappointment when it was announced that, for the first time ever, the minimum base for contributions will not be increased in line with the wage hike. Up until now, anyone earning the minimum wage was completely exempt from paying income tax but under the new regime, 20% of these employees, around half a million, will have to pay up to 300 euros a year in personal income tax.
Whether or not they are taxed will depend on the employee's personal circumstances, mainly their marital status and whether or not they have children.
For example, a minimum wage earner with a partner and a child under 3 years of age will not suffer any withholding, just like now, but if he is single and has no children, 300 euros will be withheld per year, almost half of the 700 euros by which his salary will increase.
Interestingly, of the 2.5 million or so people on minimum wage, a huge proportion work in Andalucía (476,100), although Extremadura is the region with the highest percentage of employees receiving the SMI (20.8%).
Image: Pexels
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