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Practical Income Manual 2022.


Regulations: Art. 42.1 Law Personal Income Tax

Income from work in kind constitutes the use, consumption or obtaining, for private purposes, of goods, rights or services free of charge or for a price lower than the normal market, even when they do not entail a real expense for the person granting them, provided that they derive , directly or indirectly, from personal work or from an employment or statutory relationship.

Simple payment mediation

Income from work in kind must be distinguished from those other cases in which there is a simple mediation of payment by the company with respect to expenses incurred by the employee. That is, cases in which the company limits itself to paying an amount on behalf of and by order of the employee. In these cases, the consideration required by the worker from the company does not consist of the use, consumption or obtaining of goods, rights or services, but rather it is a consideration that the company has the obligation to satisfy in monetary form, although By virtue of the mandate made by the employee, the payment is made to a third party indicated by the employee. That is, the worker allocates part of his monetary remuneration to the acquisition of certain goods, rights or services, but the payment of these is made directly by the employer. In these cases, it will be an application of monetary work income.

However, it should be noted that not always when the employer satisfies or pays amounts to third parties so that they provide their worker with the good, right or service in question, we are in the presence of monetary remuneration, considering that there is mediation of payment, since sometimes remuneration in kind is implemented through a direct payment from the employer to the third party in compliance with the commitments assumed with its workers, whether in the collective agreement or in the employment contract itself and, in such case, the amounts paid by the company to the suppliers would not be considered as a case of payment mediation, in the terms previously indicated, but rather as remuneration in kind agreed in the employment contract, so all the provisions regarding remuneration in kind would apply. species are included in article 42 of the Personal Income Tax Law .

Flexible Remuneration Plans

The implementation by a company of a "flexible compensation plan" or "flexible remuneration plan", under which the entity and its employees agree, either by virtue of a collective agreement or by modification or novation of the existing employment contract, a change in the composition of the remuneration system, in such a way that monetary remuneration is replaced by remuneration in kind or remuneration in kind is replaced by different ones. In these cases, we would not be faced with a case of mediation in payment, but rather with remuneration in kind agreed in the employment contract or by collective agreement.

Workers subject to this type of plan can, according to their needs and preferences, choose a series of products from a previously established list that may include rights or products as different as: medical insurance, daycare, food vouchers, transportation, access to sports clubs, special discounts for the enjoyment of products and services - plane tickets, hotels, health services,... -, training benefits, vehicles, transfer of use of housing, mobile phones , tablets or other computer media, stock options, etc…

In this case, the taxation of the products or services offered by the company to its employees in application of a Flexible Remuneration Plan will be governed by the provisions of articles 42 and 43 of the Personal Income Tax Law . The maximum limit of remuneration in kind may not exceed 30% of the worker's full annual remuneration (article 26.1 of the consolidated text of the Workers' Statute Law, approved by Royal Legislative Decree 2/2015, of 23 October).

Now, in order for them to have the status of remuneration in kind and not imply a simple mediation of payments made by the company regarding expenses incurred by the employee, it is necessary that the remuneration in kind be agreed upon with the workers either in the agreement collective or in the employment contract, that is, the company is obliged (depending on the agreement or contract) to provide them with the good, right or service.

Note: When the payer of the performance of the work gives the taxpayer amounts in cash so that he or she can acquire the goods, rights or services, the performance will be considered money, so the special rules for remuneration in kind discussed above are not applicable to it. in this heading.