BackThe 2023 Personal Income Tax (IRPF 2023) return campaign started yesterday, 3 April, and will be open for filing until 1 July.
In this article, we are going to resolve the main questions about what income is taxed by IRPF and also what the percentage of income to be paid for this tax is, which will be detailed below in the brackets included in this article.
Firstly, Personal Income Tax is a tax that residents in Spain must pay to the State. This tax is levied on the income received during the year, taking into account the personal and family particularities of each taxpayer.
In this sense, the taxpayer’s income covers all income, capital gains, capital losses and income allocations as defined by law, regardless of where it was generated or who the payer is, regardless of the taxpayer’s residence.
Specifically, the following cases are considered “income”:
- Income from work: Compensation, whether monetary or in kind, derived directly or indirectly from personal work or from the employment or statutory relationship, excluding income from economic activities, such as salaries, unemployment benefits or pensions.
- Income from real estate and movable capital: Profits obtained from assets or rights belonging to the taxpayer and not intended for business or professional activities, as opposed to income generated by the taxpayer’s business or professional activity.
- Income from economic activities: income derived from commercial, professional or service activities, including a wide range of activities such as manufacturing, trade, crafts, agriculture, among others.
- Capital gains and losses.
- Income allocations established by law.
There is a tax-exempt personal and family minimum, intended to cover the essential needs of the taxpayer and his dependents.
In addition, income specifically designated as such in personal income tax regulations or other relevant legislation is exempt from taxation. Outside the cases established by law, exemption of income cannot be claimed.
Therefore, doubts may arise as to what percentage of income is subject to personal income tax.
The percentage of income subject to tax varies according to the nature of the income. Income from savings is taxed at a lower rate than general income.
General income is taxed on a progressive scale, i.e. as income increases, so does the percentage of personal income tax. This therefore favors people with lower incomes.
The brackets for the 2023 personal income tax return are as follows:
- From 0 to 12,450 euros: 19% withholding tax.
- From 12,450 to 20,199 euros: 24% withholding.
- From 20,200 to 35,199 euros: 30% withholding.
- From 35,200 to 59,999 euros: 37% withholding tax.
- From 60,000 to 299,999 euros: 45% withholding tax.
- More than 300,000 euros: 47% withholding.
These brackets are an estimate by adding the state and regional tax rates, taking as a reference for the latter the rates applicable to non-resident taxpayers in Spain.
Moreover, it is important to note that the taxpayer does not pay the highest withholding rate for the totality of his or her income, but rather the percentages are applied progressively. For example, if a person earns 22,000 euros gross per year, he/she will not pay 30% on the total but will be taxed at 19 euros for the first 12,450 euros, 24% for the next 7,750 euros (second bracket), and 30% for the remaining 1,800 euros (third bracket).
B Law & Tax International Tax & Legal Advisors.
“En B LAW&TAX somos especialistas en asesoramiento fiscal internacional tanto a empresas como para particulares. Si desea ampliar la presente información, estaremos encantados de poder atenderle en el 917817194 o en info@blaw.es”
