The first salary increases thanks to the tax reform announced in September at the Thessaloniki International Fair will be seen this Friday by approximately 2 million private sector employees, with additional significant tax reliefs for young workers and families with children, equivalent to even one or two extra salaries annually for families with three or more children. January’s payroll will reflect for the first time the reduction in tax withholdings, resulting from the horizontal reduction of tax rates by at least two percentage points across all income brackets from €10,000 to €40,000.
The reform aims to increase average income, especially after a period of inflationary pressures across the developed world, with emphasis on middle and lower income groups. In practice, this means that for childless individuals with earnings from €10,000 to €20,000, the tax rate drops to 20% from this month, compared to 22% that applied until last year. For the bracket between €20,000 and €30,000, taxation decreases to 26% from 28%, while for earnings between €30,000 and €40,000, the tax is reduced to 34%, instead of 36% applied last year.
Young workers and parents the biggest winners from salary increases
Young employees will clearly see greater benefits. Starting from January’s payroll, private employees up to 25 years old will pay no tax at all on income up to €20,000. Given that most workers in this age group have few years of experience and don’t have particularly high salaries, their tax obligations are eliminated. Winners also include employees aged 26 to 30, as for income up to €20,000 they will be taxed at the low rate of 9%. Special provision is also made for parents over 30 with one or two children, who will see tax rates reduced by an additional two percentage points per dependent child.
Even greater benefits will go to families with three children, as from this year they are taxed at the minimum rate of 9% for incomes up to €20,000, while for workers with four or more children, the tax burden is eliminated up to €20,000. The reliefs for families with three children and large families mean the annual benefit is equivalent to one to two salaries. Moreover, given that the reliefs apply to each parent separately, the gain for a working couple will be even greater over the entire year.
The examples
- Private sector female employee, 25 years old with monthly net salary of €980: Since her applicable tax is now eliminated, from January her salary will increase by €91 and will rise to €1,071 net. Given that 14 salaries are paid in the private sector, the annual net benefit will be €1,283, meaning she gains almost 1.3 salaries.
- 28-year-old private sector worker with net salary of €1,500: Will now be taxed at 9% instead of 22%. This means from January he will have a monthly increase of €100 and will receive €1,600. Calculated over 14 salaries, the annual benefit will be €1,400, meaning he gains almost one salary.
- Couple of private sector employees with three children: Thanks to both parents moving to the 9% rate for the first €20,000, the couple will see a significant increase in net income. If one member of the couple receives €1,540 net, they will see a monthly increase of €121 from January. The other member has a net salary of €1,290 and their earnings will increase by €93 per month. Thus, the couple with three children will have increased monthly salaries by €214, equivalent to €3,000 annually. They gain more than one month’s salaries.
- Large family father working in private sector with net salary of €1,809: From January will see an increase of €293, receiving €2,102, as tax is eliminated for income up to €20,000. The annual benefit will be €4,100, equivalent to about two salaries. If his wife works in the public sector with net salary of €1,527, she will see her earnings increase by €140, with annual benefit of €1,680. The annual gain for the couple is €5,780 total.
- Private sector female employee with two children and net salary of €1,526: From January will receive an increase of €64, thanks to rate reduction of 2 percentage points plus another 4 points for incomes up to €30,000 for the two children, so her salary will rise to €1,590. On an annual basis, the tax reduction is equivalent to €900. If her husband also works, the benefit is greater, as he will also have separate tax benefits.
- Private sector employee without children, with monthly net income of €1,251: From January will have an increase of €200 annually, thanks to the horizontal reduction of rates by 2 percentage points. If it’s a couple and the spouse also works with similar earnings, the annual benefit doubles to €400. It should be noted that the first to see increases thanks to the tax scale reform were retirees, who received the advance of January pensions in December, while public employees previously received increased salaries.
