Spain's annual minimum wage will increase by 700 euros in 2025, but the tax authorities will retain up to 300 – CSN News

Wednesday, 12th February 2025 at 16:23

The Spanish government approved an increase of 4.4% in the minimum salary, which will bring it up to 1,184 euro in 14 installments, or 50 euros extra per month. This was done on Tuesday, 11th February. It means that 2.4million workers will receive an additional 700 euros per year. In some cases, however, the Treasury can keep up to $300 euros, depending on individual circumstances. The increase of 42% will not reach beneficiaries.

The minimum wage for full time employment will be set at 16,576 euro gross per annum, starting immediately and following the legal loophole that was created after the congress rejected and cancelled the 2024 extension of the minimum wages.

“Today we are taking a historic step in this new rise in the minimum wage,” said Yolanda Díaz, second deputy prime minister. She was happy to celebrate the “historic” rise of 61% by the government from 2018, when it was at 735 Euros. “It is in Spain’s best interest to increase the SMI. Contrary to what has been said and circulated, raising the SMI (the minimum wage) is not a danger to Spain. It’s the best thing to do for the country in order to move forward. Let’s say that the history of the SMI in our country is a success story,” stated Díaz.

Nevertheless, their excitement at the new minimum wage translated into a clear national disappointment when it was announced that for the first time ever, the minimum wages will no longer be exempted from paying taxes to the Treasury. Workers who earn the least income will be required to pay income taxes and file tax returns, contrary to previous practice. Individuals will be assessed based on their own circumstances. Treasury says that the percentage of individuals who have to submit tax reports is minimal.

First deputy PM María Jesús Montero has stood firm with Díaz in this battle and has refused to update the personal income tax (IRPF) threshold to 16,576 euros. Montero claims that, up until now, the Treasury had raised the IRPF to match the minimum wage every year. This meant that the IRPF was exempt from taxes. However, since 2018, the SMI has risen by 60%. This is “a rise well above inflation”. Montero stated that this was the first time ever that SMI had risen at such a rapid pace.

Children with children pay less tax

Treasury argues most minimum-wage earners will remain exempt from IRPF. They will also pay no tax because the “Government has already approved a reduction of personal income tax to low and medium incomes”. Experts who recommended an increase between 39 to 50 euros per monthly, estimated that only 20% of 2.4 million recipients, approximately half a million people, would pay up to 300 euros of tax annually.

The tax burden on an employee depends on his or her personal circumstances such as the number of children and marital status. Taxpayers with partners and children under three years of age will not be taxed, but parents with older children will pay 99 euros a year in tax. Those who are childless, single and earn 1184 euros per payment in a month will pay the highest amount of tax. Personal income tax will be 300 Euros for this employee profile.

The Treasury will therefore collect up to 150 million euros from these workers (the result is multiplying the maximum amount by half a million).

The decision has led to disagreements between the two major parties in government. The opposition is unambiguously critical of the decision. The trade unions are also against it because it doesn’t move towards a more “fair and egalitarian society”.

Only a limited effect

Gestha is the union for Treasury finance technicians. According to Gestha the new ruling will only apply to those earning between 15,876 to 16,578 euros a year who are singles or separated and without children, personal or family obligations, or married couples filing an individual tax return up to a shared child. All other circumstances are not taxable. Domestic workers and other workers who don’t pay withholding tax but earn less than 22,000. Euros a year will be exempted from IRPF.

Sumar is a group of left-wing politicians, similar to Gestha. They have stated that the limited effect justifies the exemption for workers and pensioners making the minimum wage.