Spain economy: treasury exempts minimum-wage earners from personal income tax

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The treasury estimates that the measure, which will cover salaries of up to 20,000 euros, will apply to three million taxpayers who will have to file a tax return

Clara Alba

Thursday, 19 February 2026, 13:34

Spain's government has approved a tax adjustment to prevent workers earning the recently raised minimum wage from losing part of it by paying personal income tax (IRPF).

The minimum wage in Spain is 1,221 euros per month in 14 payments (17,094 euros per year). To protect workers during the tax return process, the treasury has increased tax deduction from 340 to 591 euros.

This deduction aims to cover the gap between the tax-exempt minimum - 15,876 euros for those with two or more jobs or 22,000 for a single job - and the new minimum wage. It will also benefit salaries of up to 20,049 euros, in order to prevent situations where a small increase in taxable income leads to a sharp rise in the tax owed, which outweighs the benefit of the wage increase.

The measure is designed so that only those earning the new minimum wage of 17,094 euros per year benefit from a zero per cent income tax rate. For example, a worker on 17,000 would pay no IRPF, compared with 356 euros in 2025 when the minimum wage was 16,576 euros.

From that point, the tax reduction gradually decreases as income rises, extending up to salaries of 20,000 euros. The reduction will decrease by around 20 cents for every additional euro earned.

Treasury technicians (Gestha) estimate that around three million taxpayers would need to file a return to benefit from the new deduction, which will cost the public coffers around 200 million euros.

The government says that IRPF reductions since 2023 have saved almost 11.16 billion for nearly ten million low- and middle-income earners.

Submission of the declaration

Under the new conditions, Gestha recommends that all employees earning between 15,876 (the 2024 minimum wage that was previously non-taxable) and 20,000 euros file a return.

For those who are in the range between 20,000 and 22,000 euros, which the deduction does not reach, it would be in their interest to file only if they have other deductions that could recover part of the tax withheld, which generally matches the amount owed on the return.

According to the technicians, increases in the minimum wage that are exempt from taxation minimally impact employers, both in wages and social security contributions.

They call for the deduction to be extended to pensioners and the unemployed, whose incomes also count as work-related earnings. They see no reason why the tax exemption should apply only to workers, as extending it to these groups would have a very limited fiscal cost, given the higher personal allowances for age or disability and the fact that short periods of unemployment rarely push earnings above the new threshold.