The Profit and Loss Account Pay or return depends on three basic aspects: the benefits or Tax deductions that we can fall back on as they lower the tax payable; the non-withholding income that we had over the year; and especially the payments due to the Income tax higher or lower than the tax paid, which means what you deduct from our payroll if you are employed is well calculated.
Ideally, the statement should be very close to zero, that is, it doesn’t go out to pay or return as it implies that we haven’t funded Tax authorities at 0% for a year, or that the agency lent us money. For this reason, it is important to review the situation communicated to the company at the beginning of the year and to ensure that both the payroll withheld and the apply any deductionsas the possible income that can be had outside of it.
This exercise is especially important when you have multiple payers as each applies to us Withholdings based on your payments and not from the total income we receive, which in practice almost certainly means a lower withholding tax than what corresponds to us. In this case, we may ask the company to increase the withholding tax rate if we want income tax to be close to zero or to be returned.
But before doing that, it’s handy to understand how income tax works. The Income tax It works in sections and steps. In other words, the same percentages apply to all employees for each income bracket. In addition, withholding tax is applied to the difference between the next and the previous tranche.
As of January 1, the scale to which the withholding tax rate on labor income is applied has an additional section. In particular, this new tranche affects the income of more than 300,000 eurosfrom 45% retained by 2020 to 47%. This does not mean that an employee who earns more than this amount will withhold almost 50% of their income.
Especially like collected Finefor income within the first tranche of up to EUR 12,450, the withholding tax is 19%; for the tranche from 12,450 euros to 20,200 euros 24%; from 20,200 to 35,200 30%; from 35,200 to 60,000, 37%; from 60,000 to 300,000, 45% and for incomes over 300,000 euros 47%.
How much do you pay for a salary of 36,000 euros per year?
Keeping these sections in mind, a person who wins 36,000 euros per year pays 19% of 12,450 euros, that is 2,365.5 euros. Thereafter, a withholding tax of 24% is levied on the difference between the first and the second tranche (ie 20,200 euros minus 12,450 euros), which corresponds to 7,750 euros, which corresponds to a withholding tax of 1,860 euros.
For the third tranche (from 20,200 to 35,200) a withholding tax of 30% would be levied on the difference, which would amount to 15,000 euros, which would mean a withholding tax of 4,500 euros. Finally, the following section would apply, going from 35,200 to 60,000 euros. Since in this case the total income is 36,000, the difference would be 800 euros, of which 37% would be withheld, which means 296 euros.
That is, a person with a salary of The Ministry of Finance paid 36,000 euros a total of 9,021.5 euros4,298.5 euros less than the 13,320 euros it would have to pay to keep 37% of the total, which many people mistakenly think.
If the employee earned 360,000 instead of 36,000, the calculations would stay the same until the third tranche, but from the fourth tranche 37% would be applied to 24,800 (the difference between 35,200 and 60,000 euros), which would mean 9,176 euros. You would also have to pay 45% of 240,000 euros (the difference between the 300,000 minus the 60,000 euros the fifth tranche), ie 108,000 euros and 47% of the 60,000 of the last tranche (the difference between 360,000 and 300,000 euros), 28,200 euros.
So can a person with an income of The Ministry of Finance has to pay almost 150,000 euros per year to 360,000 euros, almost $ 20,000 less than what you would have to pay if the marginal rate of 47% were applied directly to your payroll. At the time of the presentation of this year’s income, this new section will not be taken into account, but since the measure came into effect on January 1st, it will come back as soon as next year if they appreciate the change.