Last year, an employee earning this salary retained 2,629 euros according to simulations by the consultancy Ilya, which exceeded the 2,379 euros of IRS due based on their income. This discrepancy resulted in a refund, while last year’s retention stood at 1,790 euros, less than the 1,888 euros in tax liability.
This trend was consistent across various taxpayer profiles, including single individuals without children and couples filing joint returns with a dependent child over six years old. In all cases, a deduction of 250 euros was assumed due to general family expenses.
This situation arises from, as tax consultant Sara Simões of Ilya emphasizes, the fact that source deductions are “increasingly aligning with people’s real situations,” allowing them to have “a greater monthly financial availability.”
When the monthly salary increases slightly, the same simulations indicate that individuals earning 1,800 euros (25,200 euros gross annually) retained 4,851 euros in 2023 and 3,403 euros in 2024, a reduction of 1,448 euros. For the same income level, the actual tax obligation was 4,361 euros in 2023 and 3,559 euros in 2024.
The difference between the amount retained and the amount owed each year turned into a refund of 489 euros last year, while this year, a taxpayer with this profile has a tax deficit of 157 euros.
For a couple with the aforementioned characteristics, each earning a gross monthly salary of 2,000 euros, the source retention decreased from 11,089 euros in 2023 to 7,832 euros in 2024, while the actual tax liability went down from 10,083 euros to 8,245 euros during the same period.
Here too, the discrepancy between retention and tax resulted in a refund of 1,006 euros last year and a deficit of 412 euros this year.
Sara Simões emphasizes that these calculations demonstrate “the practical effects of reducing source withholdings,” further revealing that “not only has the final tax due at the declaration submission decreased, but monthly financial availability is higher.”
The tax consultant notes, however, that taxpayers with this profile might not end up paying any taxes since deductions can be made for health, education, housing, or invoices that reduce the IRS by a portion of the VAT spent in certain sectors, directly lowering the tax bill.
“In reality, this [tax payment] might not occur because people are entitled to deductions, which will make a difference in reimbursements or tax payable,” the tax consultant clarifies, reminding that last September and October, people retained less than during the rest of the year, with some not paying any tax during those two months.
While many view refunds as savings, Sara Simões considers that the model striving to closely align the tax advanced to the State (via source withholdings) with what each person owes “is reasonable.”
In the IRS campaign that began at the start of this month, several taxpayers have expressed surprise upon discovering, after simulation, that their reimbursements are lower than expected or that they even have some tax to pay.
