It has been 12 years since salaried employees last saw their taxes reduced: It was in 2009 when income tax rates shrank and now, in 2021, salary workers, who are mainly middle income earners, will finally see their takings grow, improving by up to one month’s salary, according to the announcement last weekend by Prime Minister Kyriakos Mitsotakis.
The suspension of the solidarity levy, which has mainly burdened incomes over 20,000 euros per year (gross) due to its high rates, and the reduction of the social security contribution rates by three percentage points, from 39.66% to 36.66% as of 2021 (by 1.21% for workers and 1.79% for employers), will lead to a significant increase in incomes.
These measures are highly likely to continue after 2021 too, although at the moment it is impossible for them to take a permanent character. The cost to the budget from the suspension of the solidarity levy for salary workers is estimated at €800 million, the same as the contribution rate cuts by three percentage points.
Among those benefiting from the suspension of the solidarity levy are freelance professionals, as they will have to pay significantly lower taxes in 2021 for their incomes this year. When their tax declarations are processed next summer they will see that, besides the reduction to the tax on this year’s incomes with the application of the new tax rates and the introduction of a 9% rate for the first €10,000 of earnings, they will also be spared the solidarity levy.
For example, a salaried employee with gross takings of €3,000 per month currently gets €1,923.39 net. As of January 1 the cash he collects will grow to €2,020.12, which on an annual basis – including holiday bonuses – comes to an extra €1,354.22.
On the other hand, civil servants and pensioners, who did not suffer so much during the financial crisis of the 2010s, will continue to pay the solidarity levy next year. Mitsotakis said that “the government’s choice is to support the private sector, because it has suffered much more from the consequences of the pandemic.”