The Government of Catalonia and the Republican Left of Catalonia (Esquerra) have reached an agreement to lower the regional income tax (IRPF) for taxpayers with gross incomes up to €33,000 per year, with a particular focus on those earning up to €12,500.

This tax reduction, reported by Catalunya Ràdio and confirmed by La Vanguardia, is set to be approved in the upcoming Consell Executiu meeting on Tuesday.

This fiscal change aligns with the tax cut initiative proposed by former President Pere Aragonès during the budget negotiations for 2024, which ultimately did not succeed due to the breakdown of talks and subsequent early elections.

The agreed adjustment to the IRPF includes a decrease in revenues amounting to €28.8 million.

The plan modifies the tax brackets for individuals earning below €33,000, including the elimination of an existing tax bracket.

The first tranche of income tax for earnings up to €12,500 will drop from 10.5% to 9.5%, marking a 1-percentage-point reduction.

This change positions Catalonia more competitively in comparison to other autonomous communities like Andalucía, Aragón, Castilla-La Mancha, and Murcia, while Asturias will continue to have the highest rate at 10%.

In the subsequent tax bracket, the existing section for earnings up to €17,707, which was subject to a 12% rate, will be removed, and the new threshold will be set at €22,000 with a tax rate of 12.5%.

Previously, earnings between €17,707 and €21,000 were taxed at 15%.

For incomes up to €33,000, the tax rate will rise by one percentage point to 16%, while incomes up to €53,000 will incur a tax of 19%, an increase of 0.2%.

The rest of the tax brackets will remain unchanged.

This fiscal modification accompanies a recent agreement announced by the Government that includes an increase in the tourist tax and amendments to the property transmission tax affecting real estate purchases, which will see large property holders facing doubled rates.

The financial agreements involving the Government and its coalition partners reflect ongoing negotiations as the Illa administration seeks to secure funding through two decrees in the Consell Executiu and the Parliament.

These decrees are intended to provide sufficient resources for governance after the failure to finalize this year's budget.

The Government anticipates approving a decree for an additional credit supplement of approximately €4.4 billion alongside the fiscal measures.

The coming weeks are expected to be pivotal for the approval of these decrees, following ERC’s completion of its congress process, which could facilitate smoother negotiations.