- Personal income tax taxes the highest savings income more and eases the burden on low earners and small self-employed workers.
- Corporate tax falls by two points for companies with turnover below one million euros.
- Social security contributions change: the maximum base rises, and the intergenerational equity mechanism applies for the first time.
On 24 December 2022 Act 31/2022 of 23 December, the State Budget Act for 2023, was published in the Official State Gazette. Besides setting State revenue and spending, it includes a package of tax and social security changes that affect employees, the self-employed, companies and savers from 1 January 2023.
The text combines measures pulling in opposite directions: it raises taxes on the highest savings income and lowers them for low earnings from work, for small self-employed workers and for small companies. It is worth knowing them early, because some allow planning of contributions or investments and others change how much is withheld from payslips.
Personal income tax: work, savings and the self-employed
For employment income, the work income reduction is raised: anyone with net work income of up to 14,047.50 euros reduces it by 6,498 euros, with a decreasing reduction up to 19,747.50. According to the preamble, the gross salary from which tax starts to be paid rises from 14,000 to 15,000 euros a year, and the improvement reaches up to about 21,000. The reduction for economically dependent self-employed workers rises by the same amounts.
On savings, the combined scale becomes 19% up to 6,000 euros, 21% up to 50,000, 23% up to 200,000, 27% up to 300,000 and 28% above, with two brackets for the highest incomes. For self-employed workers under simplified direct assessment, hard-to-document expenses rise to 7% in 2023, and under the modules method a 10% reduction of net income applies, with the entry limits for the method extended.
Corporate tax and pension plans
In corporate tax, for periods starting from 1 January 2023, the general rate remains 25%, but falls to 23% for entities whose net turnover in the previous period was below one million euros. Newly created entities keep 15% in their first two years with a positive tax base, and the reduced rates do not apply to asset-holding entities. In addition, new electric, fuel-cell and plug-in hybrid vehicles entering service in 2023, 2024 and 2025 may be depreciated at double the coefficient.
For pension plans, technical improvements are made and the limits are maintained: 1,500 euros a year of general reduction, with 8,500 additional for employer contributions and proportionate worker contributions to the same instrument, and up to 4,250 euros more for the self-employed in certain occupational plans. The reform ensures that the worker’s maximum contributions do not fall when the employer’s contribution rises.
Contributions and what to review
In social security, the maximum contribution base rises to 4,495.50 euros a month and the common contingencies rate in the General Scheme is 28.30%, 23.60% paid by the employer and 4.70% by the worker. From 2023 there is also the intergenerational equity mechanism contribution of 0.6 points, 0.5 paid by the employer and 0.1 by the worker. The 2023 IPREM indicator is set at 600 euros a month.
In this setting, it is worth reviewing how withholdings and payslips change, whether pension plan contributions fit the current framework, and whether the company or the self-employed person benefits from the reduced rate, the modules method or accelerated depreciation. The measures depend on each situation, and this note is general information: your adviser can assess the impact in your case.
A budget does not only share out public spending: each year it also redraws the accounts of families and companies.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
