Learn about the new calculation of IRPF 2023 for your employees

As of January 2023, there have been changes in the reductions applicable in the IRPF of workers, which will be valid as of February. That’s why reviewing your employees’ withholdings to make sure they are complying with the updated tax regulations is an important task these days. If you want to know more about the IRPF 2023 withholdings calculation, we invite you to read all the information we will share with you below, let’s go!

What are the personal income tax reductions that can be applied to your employees in 2023?

As of January 1, 2023, there have been significant changes in the reductions applicable to personal income tax (IRPF) for employees in Spain. 

The number of employees who can enjoy this reduction has increased, allowing more workers to have a lower tax burden.

If you are wondering, how does the IRPF 2023 withholding calculation work? Well, the reduction is now applied to employees with net earned income of less than 19,747.50 euros. Previously it was only applied to those with net income of less than 16,825 euros, as long as they did not receive other income of more than 6,500 euros.

In addition, the amount of the reduction has also increased, and is now €6,498 for employees with earned income up to €14,047.50.

For those with net income between 14,047.50 and 19,747.50 euros, the reduction is 6,498 euros, minus the result of multiplying by 1.14 the difference between the income from work and 14,047.5 euros per year.

This increase in the reductions also implies an increase in the earned income below which your company will not be required to calculate IRPF 2023 withholdings. 

For example, if a worker has a child and his spouse does not earn income of more than 1,500 euros, his company will no longer have to withhold tax if he receives a net salary of less than 17,894 euros. We share with you a summary of the new measures: 

In order to easily adapt to the calculation of IRPF 2023 withholdings as of February, the corresponding regularization must be made. January salary withholdings should continue to be calculated according to the withholding rates on labor income existing in 2022. 

You may also be interested in: The labor market in Spain

What is the IRPF 2023 withholding calculation? 

The Tax Agency has launched an IRPF 2023 withholding calculation tool to estimate payrolls with the new IRPF calculation. The withholding calculation depends on several factors, such as salary, family situation, disability, type and duration of contract.

It is important to know the corresponding bracket according to the income received. The calculator allows you to know the payroll withholding after completing a few sections of the form.

To use the tool, you will need to enter basic information in the form. For example, your NIF number, year of birth, residence, whether you have a disability, family and employment status, and contract details.

What are the tables for calculating Personal Income Tax withholdings 2023?

The IRPF Tables, as their name indicates, provide a general idea of the amount that the company withholds from an employee’s salary, considering the amount of salary and his or her personal and family conditions. They are the divisions of the tax that we must pay to the Treasury for our income. 

These tables to calculate IRPF withholdings 2023 are based on our personal circumstances and the number of children in our family unit. In addition, there are different state IRPF brackets that vary according to the autonomous community where you live, they are called general rate and state rate.

You may also be interested in: Taking out insurance for foreigners in Spain

How are these tranches classified?

The different circumstances of each taxpayer for the calculation of personal income tax withholdings 2023 are divided into: 

• Single, divorced or legally separated and widowed. 
• Married with spouse with annual income of less than €1,500/year.
• Others.

Are there any exceptional IRPF conditions? 

• Single, divorced or legally separated, widowed living together with children under 18 years of age, elderly or disabled adults with an annual income of less than 8,000 euros.
• Married and not legally separated with spouse with an annual income of less than 1,500 euros (excluding exempt income).
• Any other family situation different from those mentioned above.

Table with Income Tax brackets 2023 

The Tax Agency has shared the brackets and limits of each income and the tax rate that companies must withhold for February 2023. Placing your staff of employees in the appropriate category will facilitate the calculation of IRPF withholdings 2023: 

Table with savings income brackets 2023 

This second table records all income from investments, such as dividends, stocks, mutual funds and shares in the profits of a company. They are considered as capital income or savings income.

In addition, discounts obtained when selling a vehicle or a house are also included, but caution should be exercised, because it is easy to exceed the limit of 200,000 euros in the latter case.

The calculation of IRPF withholdings 2023 should be a priority in the payroll management of all companies in Spain. It is important to keep in mind that, although it can be a complicated process, it is prudent to maintain the legality of the company and avoid future tax problems. 

You may also be interested in: Tax benefits for the self-employed in Spain

For this reason, if you want to be up to date and make sure that you comply with all tax obligations, do not hesitate to ask for a specialized consultancy. At TAS Consulting you will find experts in tax matters that will help you find the ideal solution for your company, so don’t wait any longer and ask for a consultancy today!