The Ministry of Labor in Spain is currently reversing its decision regarding unemployment benefits, a move that is sparking discussions across the country. According to Pablo Sempere, writing for El País, the ministry is going back on its plan to suspend contributory benefits and unemployment subsidies for those who don't file income tax returns. This change ensures that unemployed individuals will continue to receive aid even if they choose not to report their income to the tax authorities.
Understanding the Initial Measure
The original measure, which was part of a royal decree approved in May 2024 and took effect on November 1, 2024, stirred significant controversy. It mandated that unemployed individuals file IRPF (income tax) starting in 2025, or risk losing their benefits. The decree aimed to increase the amount of information the government had about lower-income taxpayers, who often remain outside the scope of many state welfare programs due to not being obliged to file taxes.
The About-Face
Now, in a significant shift, the department led by Second Vice President Yolanda Díaz has decided to eliminate the condition linking the presentation of the tax return to maintaining the right to benefits. According to ministry sources, the State Public Employment Service (SEPE), responsible for managing these benefits, will not implement the suspension outlined in the regulations. This means that whether or not someone files an income tax return will not affect the processing of their benefits.
To ensure this issue is permanently resolved before the 2025 income tax campaign, which will take place in 2026, the government is working on a legislative amendment. This action seeks to provide clarity and security to those receiving unemployment assistance.
Impact and Reactions
The initial requirement to file income tax returns had a potentially significant impact, especially on lower incomes. Individuals earning below the legal threshold—€22,000 annually from one payer or €15,800 from multiple payers (with secondary payers contributing €1,500 or more)—were previously exempt from filing taxes. Requiring them to file could have led to unexpected tax liabilities.
According to data from the Ministry of Labor, approximately 1.8 million people in Spain received some form of benefit (mainly contributory benefits and unemployment subsidies) between November 1 and December 31, 2024. Over a full year, this figure would have been much higher, as anyone who started or ended the year unemployed, or received assistance between jobs, would have been required to file.
Hacienda's Position
From the outset, the Ministry of Finance distanced itself from the measure, stating that the Tax Agency had no intention of penalizing those who did not file. Hacienda clarified that modifying the tax law would be necessary to impose fines for not declaring IRPF, something they ruled out. However, the Ministry of Labor maintained that while there would be no financial penalties, failure to file would result in the suspension of benefits.
The Underlying Objective
The Ministry of Labor’s original goal was to gather more information about lower-income taxpayers, who often remain hidden and excluded from welfare benefits due to not being required to file tax returns. The idea was to move towards universalizing income tax and improving control over the use of public funds. Requiring IRPF filing would have allowed the government to verify that beneficiaries met the requirements for accessing benefits and collect data on lower incomes, often outside the fiscal radar. This could have been a step towards implementing a negative income tax, which strengthens aid to lower-income households through direct assistance.
Relief for the Unemployed
This policy reversal provides immediate relief to thousands of unemployed individuals who faced the dilemma of filing IRPF and potentially paying taxes for the first time—despite having very low incomes—or losing their benefits. Raquel Jurado, from the Registry of Tax Advisor Economists (REAF), explained that requiring tax filing could have resulted in some beneficiaries having to pay taxes, as the withholdings applied to unemployment benefits do not always match the final tax quota, and the differences vary by autonomous community.
With the Ministry of Labor's rectification, this issue is resolved, and the unemployed will not be obligated to complete the process if they do not reach the legal thresholds for doing so. It is worth remembering that all beneficiaries can view the final draft offered by the Tax Agency to each taxpayer at the beginning of each income tax campaign. And if it benefits them, they can still file the return to qualify for the corresponding deductions and aid.
Conclusion
The Ministry of Labor's decision to reverse its policy on unemployment benefits and IRPF filing reflects an effort to balance administrative objectives with the immediate needs of vulnerable populations. By removing the requirement to file taxes as a condition for receiving aid, the government is aiming to alleviate financial pressures on unemployed individuals and ensure they continue to receive necessary support. The upcoming legislative amendment will further solidify this commitment, providing certainty for beneficiaries in the years to come.
