Why you should be interested in learning the tax brackets for Personal Income Tax

The personal income tax (IRPF) tranche table helps to determine the percentage of tax that each worker pays in proportion to their income

The time has come to complete tax returns, and one of the pillars of understanding how personal income tax is paid is understanding the income tax brackets.

These stretches point out what percentage of taxes owes pay every contributor and go escalating increasing depending on your gross incomes, which can know thanks to our calculator of salaries, in a proportional way; the philosophy behind this system is to reduce tax payment for people with low incomes while increasing it for those who earn more.

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The personal income tax (IRPF) brackets for 2017 are as follows:
IRPF brackets for 2017
IRPF brackets for 2017
Tax base
Withholding
IRPF brackets for 2017
€0
€12,450
19%
IRPF brackets for 2017
€12,450
€20,200
24%
IRPF brackets for 2017
€20,200
€35,200
30%
IRPF brackets for 2017
€35,200
€60,000
37%
IRPF brackets for 2017
More than €60,000
45%

How the personal income tax brackets work

As you can see, the personal income tax table has a progressive scale of tax payments. In addition, each bracket should not be considered as a fixed block in which taxes are paid according to the total income, even if the total income exceeds the limit of the new bracket by a few hundred euros.

In practice, this flexibility translates into each worker paying a certain percentage for the money earned in each bracket, not for the total income obtained in the maximum bracket. Let's consider the following example:

Imagine that a worker earns 21,000 euros gross a year, which in tax jargon is called "earned income". Should this worker pay 30% of their total annual salary for having passed the limit between brackets by just 800 euros? No. In reality, the personal income tax (IRPF) payment of this taxpayer would be as follows:
Tax Base: € 21,000
Tax Base: € 21,000
Tranche
Payable
Tax Base: € 21,000
First bracket: pay 19% of €12,450
€2,365.50
Tax Base: € 21,000
Second bracket: pay 24% of €7,750 (the difference between the first and second bracket)
€1,860
Tax Base: € 21,000
Third bracket: pay the difference between your income of €21,000 and the limit of the bracket, of €20,200
€240
Tax Base: € 21,000
Payable amount not including other fiscal and personal data
€4,465.50

In this way, we can see how the taxpayer did not have to pay the total income based on the withholding percentage of the third bracket (30%) by "exceeding" the limit by just 800 euros.

Therefore, the withholdings that have been made throughout the year and any deductions to which the taxpayer is entitled are subtracted from the total payable.

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Knowing the personal income tax (IRPF) brackets is a useful way to understand why we pay a certain amount of money to the Treasury Department on our annual tax return. However, not all taxpayers have to file an annual tax return.

Thus, although the public revenue service specifies that “all taxpayers who are individuals resident in Spain must submit a return", there is a series of exceptions, namely:

Who is exempt from filing a tax return?
Who is exempt from filing a tax return?
Workers whose annual gross salary (earned income) is €22,000 or less.
  • Provided that the salary comes from a single payer.
  • When there are several payers, so long as the sum of the second and subsequent parties by amount as a whole do not exceed €1,500.
  • When the only earned income is passive benefits
Who is exempt from filing a tax return?

The limit is €12,000 per annum in the following cases:

  • When the earned income comes from more than one taxpayer and the sum of the amounts received from the second and subsequent by amount is more than €1,500 per annum.
  • When a compensatory spouse pension or non-exempt food subsidies are received.
  • When the payer of the earned income is not required to withhold tax.
  • When the only earned income is subject to a fixed withholding.
Who is exempt from filing a tax return?
Capital gains subject to withholding or interim income, with a joint limit of €1,600 per annum.
Capital gains from transfers or redemptions of shares or equity interests in collective investment institutions are excluded from the joint limit of €1,600 per annum.
Who is exempt from filing a tax return?
Imputed real estate income, yield from treasury bills and subsidies for the purchase of social protected or assured price housing, with a combined limit of €1,000 per year.
Those who have had exclusively capital losses of less than €500 are also excluded.
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