Salaries, benefits and investments: where does the people of Malaga's income come from?

The people of Malaga filed 300,602 income tax returns in the last year for which the state's tax authority (AEAT) has published data - that is, the 2024 campaign using data from fiscal year 2023. These statistics render it possible to determine the gross income declared by individuals and which sources of income, that is, whether it comes from salary income, investment returns, benefits or income from some other economic activity.

Putting it succinctly, employment has the least impact on incomes among the lowest and highest earners. State benefits play a more important role for those on lower incomes, whereas capital gains and other economic activities are the bigger earners for those in the higher income brackets. This is how both groups supplement their annual income.

While filing a tax return is not mandatory for gross incomes up to 22,000 euros from a single taxpayer, a good number of people file a tax return even if their income falls below this threshold. One reason is that filing is compulsory for those in receipt of the minimum living income ('Ingreso Mínimo Vital', IMV). Another is that it allows taxpayers to take advantage of any applicable deductions and tax allowances available to them, potentially resulting in refunds. Furthermore, if there are two or more taxpayers, for instance as with a joint declaration, the obligation to file a tax return begins at a lower income level.

According to the latest Treasury data, the average gross annual income of taxpayers in Malaga city is just over 30,000 euros, 77% of which comes from salaries, 7% from capital gains and economic activities. Nearly 5% is tax-exempt income, which may include benefits such as IMV, maternity leave, grants and scholarships, long-term care allowances, severance pay or non-taxable allowances, among other items.

A word of caution: we cannot talk strictly about personal income here, since there are tax returns that couples file jointly.

However, the data provided by the AEAT provides a much more detailed breakdown. For instance, in Malaga city, 82,844 tax returns were filed with taxable income - gross income less deductions and allowances and the amount on which tax rates are applied - up to 6,010.12 euros (the largest group of all the tax brackets into which Spain's tax authorities divides the city's taxpayers). The total declared income of all these taxpayers amounted to almost 860 million euros, with almost 70% of this (just over 601 millions) coming from earned income. Meanwhile, more than 197 million euros, almost 23% of the total, is tax-exempt income, most likely benefits, aid and subsidies, such as the aforementioned IMV, since contributory pensions count as earned income. Only 3.67% of this group's income comes from capital gains, while only 2.51% is obtained via economic activities.

Although they are taxed on less than 6,000 euros (that is the taxable base after deductions and reductions), the average income of taxpayers in this, the lowest, bracket is 10,372 euros, with the Spanish average at close to 10,500 euros. Of this amount, based on the aforementioned proportions, 7,258 euros would correspond to salary income and 2,381 to tax-exempt income (for example, benefits, but also allowances not subject to tax).

By contrast, in Marbella, another municipality in the province for which data is available, taxpayers with taxable income below 6,000 euros rely on 76.2% salary income and 13.6% on benefits. In their case, capital gains provides almost 6% of their gross income.

The next income bracket is made up of taxpayers with a taxable income of between 6,010.12 and 12,020.24 euros (corresponding to an average gross income of 17,374 euros, similar to the national average). The number of declarations for this bracket was 32,578, a lower figure than those in the preceding bracket. In this case, the declared gross income amounted to 566 million euros, of which 78.79% (446 million euros) relates to salary income, while only 7.5% (42.4 million euros) is tax-exempt income (mostly benefits), and even less, around 6% each, stems from economic activities and capital gains.

Taking into account the average gross income of 17,373 euros, approximately 13,700 euros would come from salary income and the remaining 3,500+ euros would be distributed among capital gains, income from economic activities and tax-exempt income. That said, it is also possible - indeed, more likely - that there are people in this and all segments of the population who obtain most of their income from economic activities and others almost exclusively from salaries or wages.

Tax returns with taxable income between 12,020.24 and 21,035.42 euros (equivalent to an average gross income of 22,275 euros, compared to the national average of 22,367 euros) totalled 55,124 in Malaga for the last year for which data is available. Their aggregate gross income was 1.228 billion euros. In this case, salary income exceeded 1.032 billion euros, that is 84% of the total, while the proportion of income from economic activities amounted to 67 million euros, equivalent to 5.46% of the total. 67 million, equivalent to 5.46% of the total. Investment returns provided almost 5% of their income. Lastly, benefits and other tax-exempt income accounted for 4.6%.

An average taxpayer in this income bracket earning 22,275 euros gross per year would receive 18,726 euros nett from their job, while between 1,000 and 1,200 euros would come from each of the other sources of income.

Moving on up to the next income bracket, 49,202 tax returns with taxable incomes of 21,035.42 to 30,050.61 euros (or average incomes of around 30,000 euros) were filed last year in Malaga city. It is important to make it clear that this number of residents might not be the only ones at these income levels, as it is possible that, as with the other income brackets, some of these are bound to be joint tax returns filed by couples.

Well, for this group the total gross income is close to 1.475 billion euros, 87% of which comes from employment. In this case, tax-exempt income represents just 3.47% of the total, at 51.2 million euros. However, capital gains are slightly higher at 4.83% and income from economic activities accounts for 3.77%.

A taxpayer earning 30,000 euros gross per year would owe around 26,000 euros of that income to their salary.

The next tax bracket on the AEAT list is for tax returns with taxable income of between 30,050.61 and 60,101.21 euros (corresponding to an average gross income of 46,321 euros in Malaga and 46,678 euros across Spain). Of these amounts, 64,776 returns were filed in the provincial capital of Malaga. They add up to a gross combined income of 3.0 billion euros, 85.3% of which is explained by employment, while 6% came from capital gains and 4.46% from economic activities. In this case, income from benefits and other tax-exempt income fell to just 2.3% of the total.

Salaries account for 39,500 euros of the 46,300 euros that are filed on average per tax return and investment income contributes around 2,800 euros. Income from economic activities, meanwhile, contributes just over 2,000 euros. However, the most accurate way of interpreting these statistics is not to look at these proportions, as it is clear that salary income weighs more heavily here simply because more of the people in this income bracket are engaged in professional activities or are better remunerated for the services they provide.

From this point onwards, all taxable incomes exceeding 60,101.21 euros are included in this category, which corresponds to an average gross annual income of 118,078 euros, a figure that rises to 137,100 euros on average across Spain. In the last financial year, 16,078 tax returns above this threshold were filed in Malaga city for a total gross value of almost 1.9 billion euros. In this case, the proportion of salary income is much lower than in previous income brackets. Thus, salaried work accounts for only 55.5% of total gross income, at almost 1.053 billion euros. In contrast, economic activities gain ground, contributing 17.62% of total gross income, as do investments, whose returns represent 13.13% of income. Likewise, capital gains take a larger slice than before, climbing to 12% of total tax declared by this group.

The example of Marbella takes this switch from salary dominance a step further. At its local AEAT office, 4,503 tax returns were filed with taxable incomes exceeding 60,100 euros. These represented a total gross income of 677.2 million euros, of which only 36% came from salaries. Meanwhile, the wealthiest taxpayers in Marbella obtained 25% of their income from economic activities, with capital gains also providing 20% of annual income.