Personal income tax withholdings are adjusted to the increase in the minimum interprofessional salary.

Because of the increase in the amount of the minimum interprofessional salary (SMI) to 15,876€ per year, Royal Decree 142/2024, of February 6, has been approved, which amends the Personal Income Tax Regulations to prevent taxpayers who receive the SMI from having to pay withholding or payment on account. 

The amount of the reduction for obtaining earned income is also increased in order to avoid that the reduction in the amount of the withholding can be converted into a higher differential amount in the annual tax return in case of being obliged to file it.

We inform you that Royal Decree 142/2024, of February 6, has been published in the BOE of February 7, in force and effective as from February 8, which has modified the IRPF Regulation (RIRPF) regarding withholdings and payments on account.

Because of the increase in the amount of the minimum interprofessional wage (SMI) to €15,876 per year, the legislator modifies the rule to prevent taxpayers who receive the SMI from paying withholding or payment on account.

The amount of the reduction for obtaining earned income is also increased to avoid that the reduction in the amount of the withholding can be converted into a higher differential amount in the annual tax return in case of being obliged to file it.

The main objective of the amendment is the increase of the minimum amount to make withholdings from 15,000 euros to 15,876 euros, which will allow that those who receive the SMI in 2024 will not have to pay withholdings for this tax. Likewise, to avoid the corresponding error of jump in the tax rate, the measure is extended to taxpayers with net income from work of up to 19,747.5 euros per year, who will see their withholdings or payments on account reduced.

1. Quantitative limit excluding the withholding obligation

To avoid that the workers who receive the minimum wage are subject to withholding or payment on account, with effect from February 8, 2024, the new amounts of the earned income from which withholding and payment on account are made are established, depending on the number of children and other descendants and the situation of the taxpayer.

For the purposes of the application of the provisions of the above table, children and other descendants are understood to be those that give right to the minimum amount for descendants provided for in article 58 of the Personal Income Tax Act.

Regarding the taxpayer’s situation, this may be one of the following three situations:

1. Single, widowed, divorced, or legally separated taxpayer. This is the single, widowed, divorced or legally separated taxpayer with descendants, when entitled to the reduction established in article 84.2.4.º of the Personal Income Tax Law for single-parent family units.
2. Taxpayer whose spouse does not obtain income over 1,500 euros, excluding exempted income. This is the married taxpayer, and not legally separated, whose spouse does not obtain annual income more than 1,500 euros, excluding exemptions.
3. Other situations, which include the following:

• The married taxpayer, and not legally separated, whose spouse obtains income more than 1,500 euros, excluding exempted income.
• The single, widowed, divorced, or legally separated taxpayer, without descendants or with dependent descendants, when, in the latter case, he/she is not entitled to the reduction established in article 84.2.4. of the Personal Income Tax Law due to the circumstance of cohabitation referred to in the second paragraph of said section.
• Taxpayers who do not state that they are in any of the 1st and 2nd situations above.

2. Reduction for obtaining income from work

The RIRPF is also modified with respect to the reduction for earned income, so that the receipt of earned income for an amount equal to or less than the SMI is not subject to withholding. 

The income close to said minimum wage is also affected by the new reduction that is established, since otherwise there would be a jumping error. Thus, the total amount of the remuneration for work, in cash and in kind, will be reduced, when the net income from work is less than 19,747.5 euros, by the following amounts:

1. If the net income from work is equal to or less than 14,852 euros: 7,302 euros per annum.
2. If the net income from work is greater than 14,852 euros and equal to or less than 17,673.52 euros: 7,302 euros minus the result of multiplying by 1.75 the difference between the income from work and 14,852 euros per year.

1. If the net income from work is higher than 17,673.52 euros and lower than 19,747.5 euros: 2,364.34 euros minus the result of multiplying by 1.14 the difference between the income from work and 17,673.52 euros per year.

For the computation of such reduction, the payer shall consider, exclusively, the amount of the net income from work resulting from the reductions provided for in paragraphs a) and b) above, without such reduction being able to be greater than the amount of such net income.

3. Transitional regime. Entry into force of the new withholding and payment on account amounts in the 2024 tax period.

To clarify the temporary effects of the new regulation and to reduce the administrative burdens derived from its implementation, a new twenty-first transitory provision is introduced in the RIRPF where it is established that:

• In order to determine in the 2024 tax period, the withholding or payment on account rate to be applied on income from work paid prior to February 8, 2024, to which the general withholding procedure is applicable, the amounts provided in paragraph 1 of Article 81 and the reduction of letter d) of paragraph 3 of Article 83 of this Regulation in force as of December 31, 2023 will be taken into account.
• In order to calculate as of February 8, 2024 the withholding or payment on account rate applicable to the income paid or paid as of that date, the new wording in force of article 81 and article 83.3, c) of the RIRPF will be taken into account, regularizing, if applicable, the withholding or payment on account rate in the first income from work paid or paid as of that date. However, at the payer’s option, it may be made on the first earned income paid or paid as from March, in which case the withholding or payment on account rate to be applied on earned income paid prior to this date shall be determined taking into consideration the provisions of point 1 above.

For further information, please consult with Tax Consulting

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