Government adjusts withholding tables to compensate for excess tax paid since January

The Government has approved new IRS withholding tables, which will reflect a tax reduction and compensate, during the months of September and October, for the excess amounts withheld since January for dependent workers and pensioners. Thus, as an exceptional measure, gross salaries up to 1,175 euros will be exempt from withholding, unlike the previous threshold of 934 euros. This measure translates into a saving of 114.68 euros per month for a single person without children.

For pensioners, withholding tax will not apply to pensions up to 1,202 euros for a single, divorced, widowed, or married person (two earners). Previously, withholding applied from 838 euros. This adjustment will result in a gain of 111.71 euros per month in September and October.

Starting in November, new withholding tables will come into effect, without the retroactive mechanism applied in the previous two months. Thus, in November, withholding will again apply to monthly earnings starting at 935 euros and pensions starting at 937 euros for unmarried individuals without children. These new tables reflect the IRS reduction approved by Parliament, with the lowest rate dropping from 13.25% to 13%, and the 18% rate reducing to 16.5%, among others.

The Government initially planned to apply the retroactive mechanism only in September but concluded that it would not be sufficient to compensate all taxpayers. Therefore, they decided to spread the compensation over two months. However, those without work or pension income in September or October, such as workers who became unemployed or switched to freelance work, will not benefit from this reduction in withholding tables.

On the other hand, those who changed jobs and received salary increases, or those who were unemployed and started working as employees, will benefit, as the September and October tables will consider that the monthly income was earned since January.

The Ministry of Finance clarifies that, since withholding tables are tax prepayments, the necessary adjustments will be made next year during the IRS settlement. Those who overpaid may receive a smaller refund, while those who underpaid may have to pay the difference.

Social Security pensioners may feel this relief only in October, as September’s pension receipts have already been processed using the previous tables. However, the Ministry of Finance believes it is still possible to correct the tables before the payment on September 8.

Additionally, the supplement of between 100 and 200 euros to be paid in October to retirees whose total pensions do not exceed 1,527.78 euros will also be subject to withholding tax but separately, without adding to the regular pension for calculating the withholding rate. Therefore, pensioners will also benefit from a significant reduction in withholding on this extra amount.

Finally, pensions from the Caixa Geral de Aposentações (CGA), which are paid on September 18, should already reflect the reduction in IRS withholding.