Who could pay less income tax in 2023?

The new table for the payment of income tax — each year it is adjusted by law and according to inflation — implies that some taxpayers will pay less. The Internal Revenue Service (SRI) indicated that, by raising the exempt base, the tax-free base increases. The exempt basic fraction goes from $11,310 in 2022 to $11,772 in 2023.

The director of the SRI, Francisco Briones, indicated that if a taxpayer’s salary is less than $1,750, the income tax payable is zero and there will be no discount on the role and “if it is higher, the tax will go up as income rises.” ”.

Until 2021, another mechanism was in force: those who earned $2,304 did not have to pay income tax if they applied to the maximum all the deductions that were then in force for personal expenses; if they reached $2,305 in monthly salary, $0.21 was paid for that year. In 2022, with that same salary, with the application of the new tax law and making the most of the reduction in personal expenses —which replaced deductions—, that worker began to pay $929.02 in income tax. And in this 2023 he would pay $845.42. This is how Pablo Guevara Rodríguez, Andersen’s partner in Ecuador, explains it.

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The expert cites other examples considering the monthly salaries and if the reduction is used to the maximum: those who have a salary of $1,691 would go from a tax of $25.93 in 2022 to $0 in 2023. With a salary of $1,752 the payment would be reduced from $105.47 to $45.75. Or if you win $2,000 it would drop from $431.90 to $369.12. In all the calculations of these cases, he considers a basic family basket in force at November 2022 of $761.14 and the use of the maximum deduction of personal expenses for 2021 and use of the maximum reduction of personal expenses for the years 2022 and 2023. .

The change in the tax-reduced basic fraction from $11,310 to $11,722 also adjusts the section and reduces personal expenses.

The basic fraction is taken into account to determine if the taxpayer can apply the 10% or 20% discount. If the gross income of the taxpayer (all remunerations, including tenths, reserve funds) does not exceed the equivalent of 2.13 basic fractions —in this case, $24,967.86—, 20% of personal expenses may be deducted from the tax ; and, if it exceeds that value, you can only apply 10% of said expenses.

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But that discount has a limit, which is the value equivalent to seven basic baskets determined by the National Institute of Statistics and Censuses (INEC). As of November 2022, that basket stands at $761.14, which multiplied by seven gives a maximum of $5,327.98 (compared to the previous one, which was around $5,007). That is, the discount that can be applied in 2023 would be around $532 for 10% and up to $1,065 for 20%.

For these discounts, the lower of the two values ​​is applied: seven times the basic basket or the amount supported on invoices.

Until 2021, personal expenses were deducted from the tax base of the income tax, which made the base decrease and, therefore, a lower income tax came out. But as of 2022, personal expenses are a reduction in the income tax payable: it is a tax credit of between $500 and $1,000, explains Guevara, who specifies that the new table is an update that is made every year. . He considers that it is important to understand that this value is not set by the Government; It is not that it decides to raise or lower the basic fraction, but rather that it obeys a legal norm. (YO)