The amount the IRS withholds from wages and pensions rises to $762 in January, according to new tables to be published this Monday, which will be in effect until the new withholding model comes into effect in July.
The new tables, which will only be applied in the first half of next year, are intended to incorporate changes to the IRS that have been included in the National Budget for 2023 (OE2023), namely the new minimum subsistence rules, the update of by 5.1% and a drop of two percentage points (from 23% to 21%) in the marginal rate of the second bracket.
For example, from January only salaries and pensions with a value equal to or greater than EUR 762 gross monthly will be withheld at source, which translates into an increase of EUR 52 compared to the value of the salaries that are exempt from withholding tax this year and 42 euros for pensions. The following value levels are also subject to change from the tables in effect this year, as are the respective rates.
According to the Treasury Department, this transitional retention model — which is in effect until the end of June — “guarantees that employees and retirees who have been increased between the end of 2022 and January 2023.”
Pensions will be increased from January by 4.83% to 3.89%, depending on their value. In January, the majority of civil servants will also be increased and the same will happen to many of the private sector employees, taking into account the current high inflation.
In cases where income processing has been carried out before the entry into force of these new tables and their payment will already take place during their validity, during the month of January, the debtor or payer will receive the respective adjustment of the discount from the Tax Authorities until the end of February 2023.
In the order associated with the new withholding tax tables, to which Lusa had access, it has been determined that they apply to income from employment and pensions paid or provided between January 1 and June 30 of the year 2023.”
This solution, which applies for half of the year the deduction model that has been in place for the past decades and evolves into the new in the second half, aims to “give paying entities time to adapt their payment systems to the new withholding model,” said the Ministry of Finance.
According to the OE2023 report, the change in the subsistence level will translate into a reduction in the IRS of EUR 200 million in 2023, in addition to a reduction of EUR 500 million and tax through the update of the scales and the reduction of the marginal rate in the second tier.
Source: DN
