The value of the minimum existence in the IRS rises in 2023 and the calculation will have new rules. Find out if you are tax exempt.
Taxpayers who receive lower incomes are exempt from paying IRS. O minimum of existencethe amount up to which this tax exemption exists, rises again in 2023, moving to the 10,640 euros.
It is only after this amount that dependent workers, self-employed workers and pensioners begin to pay the IRS. However, there are details to be taken into account in each of these cases.
In addition, the State Budget for 2023 provides for a reformulation of the calculation rules for this indicator. The objective is to reach workers and pensioners with monthly incomes between 760 and 1000 euros.
Why is there an existence minimum with the IRS?
What is intended with the minimum existence of the IRS is to ensure that all taxpayers have at their disposal a certain net income on which they do not pay tax. Thus, they will have enough to pay expenses and ensure the livelihood of the household.
The minimum existence of the IRS is foreseen in the Article 70 of the IRS Code and is calculated using the following formula:
Minimum existence = 1.5 x 14 x IAS amount
The Social Support Index (IAS), as the name suggests, is a value fixed annually by the Government as a reference for calculating social benefits. It was, by definition, the factor that determined the minimum existence in the IRS each year. However, in 2021 it was no longer like that.
What changed in the minimum of existence?
In 2020, Parliament approved, in particular, an amendment to the State Budget (OE) proposal for 2021, which made raise the value of the IRS minimum existence by 200 euros.
The limit is thus passed to the 9,415.01 euros per year (672.5 euros per month)increasing the number of taxpayers who were exempt from the tax.
This addition of 200 euros to the minimum stock was, at the time, defined as a exceptional measure.
That is, as in 2021 the IAS remained at 438.81 euros, the minimum existence should be fixed at 9215.01 euros. But due to the increase in the minimum wage to 665 euros, this level became slightly higher.
This is because the IRS code provides for a safeguard according to which the income net of tax, per holder, cannot be less than the annual value of the guaranteed minimum remuneration. That is, whoever earns the minimum wage never has to pay IRS.
And taking into account that that year the minimum wage rose, the minimum amount of existence in 2021 was 9,415.01 euros. Thus, taxpayers who had income up to that amount were exempt from paying IRS in 2022.
What was the value in 2022?
In 2022, the minimum existence rose again, having the national minimum wage as a reference value. Now, as the value of the minimum remuneration increased to 705 euros, the exemption threshold rose to 9,870 euros per year.
Value of the minimum existence for 2023
In 2023, the minimum existence in the IRS rises from 9,870 euros for 10,640 eurosagain reflecting the increase in the minimum wage for 760 euros. However, in the following years, the update will be made according to the evolution of the IAS.
A change that will already be felt when, in 2023, these taxpayers submit the IRS declaration on their 2022 income.
Who is covered by the existence minimum?
The existence minimum covers employees, pensioners and self-employed workers. It applies whatever your marital status and whether you choose to file the declaration together or separately.
However, there are some details to be aware of in the following situations.
Although the minimum existence is defined by applying its calculation formula, this amount may be higher when dealing with a large family.
|household||Minimum of existence|
|Family with 3 or 4 dependents||11,320 euros|
|Family with 5 or more dependents||15,560 euros|
|Married and cohabiting partners (separate taxation)||1/2 of these amounts for each holder|
In these cases, according to number 2 of article 70 of the CIRS, IRS rates are not applicable. The same is to say that large families only start paying IRS if their taxable income exceeds these limits.
The minimum existence in the IRS also applies to self-employed workers, although they only feel this effect when submitting the annual income tax return.
There is, however, one exception to be aware of. Self-employed workers whose activity corresponds to the code 15 from the table of activities of article 151 of the CIRS — “Other exclusively service provision activities” — are not covered by the existence minimumregardless of the yield obtained.
If you find yourself in this situation, whatever amount you earn, the IRS is really there to pay.
What will change in the IRS existence minimum?
The objective of the change is that those who earn a little above the minimum wage do not see this income above the minimum wage taxed at 100%.
According to the Government accounts, this situation affects dependent workers and pensioners who earn around 50 euros/month above the minimum wage. In the case of self-employed workers, the range is around 70 euros/month.
Here’s an example: a single person with a gross annual income of 10,555 euros has, after IRS taxation, a net income of 9,870 euros. The same amount as a single person with a gross annual income of 9,870 euros. That is, even earning above the minimum wage, the first taxpayer ends up with the same income as the second.
The idea will be, according to the Government, to benefit “income of up to 1,000 euros per month and eliminate the current distortion of taxation”, giving greater progressivity to the tax.
Thus, in 2022, the new minimum existence rules benefit holders of annual gross income of up to around 11,220 euros. In 2023 it will reach those who earn around 13,000 euros a year and in 2024 those who earn 14,000 euros a year, that is, 1000 a month.