The government is preparing to raise the income tax deduction from around €590 to nearly €1,030 annually. The aim is for the increase in the minimum wage for 2027 to be fully reflected in salaries.
The deduction that compensates for the taxation of lower incomes would rise from about €590 to nearly €1,030 annually, according to El Plural. The change seeks to ensure that the anticipated increase in the minimum wage for 2027 does not lose part of its effect on salaries.
The Ministry of Labour confirmed a 5.3% increase in the minimum wage, which will rise from €17,094 gross annually to €18,004, distributed over 14 payments. Without a parallel fiscal adjustment, single workers without children would pay over €600 additional per year, as they have fewer options to apply other deductions.
The calendar sets the pace for the Executive. The period for objections to the Labour proposal ends on November 16, so the Council of Ministers could approve the new minimum wage on November 17 or 24. Afterwards, the Treasury will take the fiscal changes to the Congress, where they must go through the Permanent Deputation or the new Cortes if they are already constituted.
According to tax expert Aitor Fernández from TaxDown, a single worker without children earning €17,094 contributes €1,111 to Social Security in 2026 and pays €591 in income tax, an amount that is recovered later with the deduction in the tax return. With the minimum wage at €18,004, contributions would rise to €1,174 and the tax bill would be around €1,034. If the current deduction were maintained, it would drop to €409 and the worker would end up paying over €600.
The General Council of Economists, through its president Miguel Ángel Vázquez, considers an automatic mechanism necessary to avoid changing the regulations every time the minimum wage rises. Vázquez advocates for directly preventing withholdings instead of forcing workers to claim the money back in their tax returns.
CC OO and UGT demand a permanent legal reform so that increases in the minimum wage are fully reflected in salaries. The unions warn that taxation can also penalise those earning slightly higher wages and believe that the taxation of the minimum wage should be addressed in a broader reform, with greater contributions from higher incomes.
The minimum wage already affects around 2.5 million workers and has risen by 66% since 2018. In the political arena, Alberto Núñez Feijóo accused the government of benefiting fiscally from wage increases, and the Executive responded by defending the income tax cuts applied to lower incomes.
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