The amount from which wages and pensions withhold IRS increases in January to 762 euros, according to the new tables that will be published this Monday, to be in effect until the entry of the new withholding model, in July.
The new tables, to be applied only during the first half of next year, were designed to accommodate changes to the IRS included in the State Budget for 2023 (OE2023), namely the new rules for the minimum existence, the update of the by 5.1% and a decrease of two percentage points (from 23% to 21%) in the marginal rate of the second tier.
Thus, from January, only the salaries and pensions equal to or greater than 762 euros monthly gross start withholding, which translates into an increase of 52 euros compared to the value of salaries that this year are exempt from withholding tax and 42 euros in relation to pensions. The following levels of values are also subject to changes in relation to the tables in force this year, as well as the respective rates.
According to the Ministry of Finance, with this transitional retention model – which is in effect until the end of June – “it is guaranteed that workers and pensioners who have been increased will in fact have an increase in net income between the end of 2022 and January 2023”.
Pensions will have an increase, from January, of between 4.83% and 3.89%, depending on their value. In January, the majority of civil servants will also be increased and the same will happen with many of the private sector workers, taking into account the current high level of inflation.
In cases where the processing of income was carried out before the entry into force of these new tables and their payment will occur already during their validity, during the month of January, the debtor or paying entities will have to make the respective adjustment in the discount from the IRS until the end of February 2023.
In the order that accompanies the new withholding tax tables, to which Lusa had access, it is determined that these apply to income from dependent work and pensions paid or made available between January 1st and June 30th of the year 2023″.
This solution, in which for half of the year the withholding model that has been in force in recent decades is applied and in the second half it moves towards the new one, aims to “give time to paying entities to adapt their payment systems to the new model of withholdings”, according to the Ministry of Finance.
According to the OE2023 report, the change in the minimum existence will translate into a 200 million euro IRS reduction in 2023, to which is added a reduction of 500 million euros and tax via the update of the scales and the reduction of the marginal rate in the second tier.
IRS reduction of up to 25 euros on a salary of 1350
The changes to the IRS that arrive in 2023 will mean that a salary of 1,350 euros will pay 15 euros less in IRS, in January, and 25 euros less, from July, compared to what you pay in 2022.
According to simulations carried out by the Ministry of Finance, a single person without dependents, with a gross salary of 1350 euros, currently deducts 219 euros via the IRS. In January, with the new withholding tables, the tax will drop to 204 euros and from July onwards there will be a new reduction, starting to deduct 194 euros.
If this person, with these characteristics, has a salary increase of 5.1% in January (which will increase his salary to 1,419 euros gross monthly), the IRS withholding tax will be 230 euros between January and June ( resulting in a salary net of tax of 1,189 euros), going down to 213 euros from July (with the net salary of IRS being 1,204 euros).
A single person with a dependent and a gross salary of 850 euros currently deducts 57 euros from the IRS. In 2023, this taxpayer will have a relief of 20 euros starting in January, starting to deduct 37 euros. In July, a new change, with the withholding tax being reduced to one euro.
This evolution will make the salary net of tax rise from the current 793 euros, to 813 in January and to 849 euros from July.
With an increase of 5.1% in 2023, gross salary rises to 893 euros, with the new retention tables ensuring a net tax value (not counting Social Security discounts) of 834 euros in January and 871 euros from July onwards.
This evolution of deductions (and consequently of the net value in case of salary maintenance or increase) reflects two situations: on the one hand, the new withholding tables that will be in force between January 1st and June 30th and that are updated taking based on the changes in the minimum and existence, the update in 5.1% of the brackets and the reduction from 21% to 23% of the marginal rate of the second bracket of the IRS, foreseen in the State Budget for 2023 (OE2023).
On the other hand, the new model of withholding tax tables that starts in July and that follows a marginal rate logic, in line with the IRS levels, aiming to avoid regressive situations.
“Once the new model has been adopted, an increase in gross salary will always correspond to an improvement in net salary” contrary to what “was seen in some situations with the current retention model”, says the Ministry of Finance.
This is what makes a worker married to a dependent and with a gross income of 2,500 euros per month that has not been increased maintain his income in the first half, experiencing a net increase of 41 euros from July.
Having a salary increase of 5.1%, you will have a monthly gain of 75 euros until June and 120 euros from July.