Payments in kind: how to optimize Personal Income Tax (IRPF) taxation?
A payment in kind or flexible is that which an employee receives in goods, rights or services, instead of collecting all the salary through monetary compensation. It is a motivation and incentive that can influence the welfare of the worker and, as a consequence, their performance.
There are several tax exemptions in some of these forms of compensation, causing a decrease in taxation on the Personal Income Tax. These assumptions and limits are foreseen in articles 42 and 43 of the PIT Law and in articles 43 to 48bis of the PIT Regulations.
How are the payments in kind taxed in the Personal Income Tax?
When making your PIT fulfillment, you must include the payments in kind that are not exempt and, generally, tax them as income from work.
In general, payments in kind will be valued at their normal market value, which will be added to the payment on account, unless the amount has been passed on to the worker.
Next we explain some of the most recurrent cases.
Taxation of housing as payments in kind
The use for private purposes of a property owned by the employer without paying any remuneration will be valued at 10% of the cadastral value. If it was revised in the last 10 years, it would be 5%. The result may not exceed 10% of the remaining work benefits.
Taxation of vehicles as payments in kind
In the case of vehicle delivery, the cost of acquisition for the payer is taxed, including taxes involved in the transaction.
In the case of use for private purposes of a vehicle owned by the employer, it pays 20% per year of the cost of acquisition. If the vehicle is not owned by the payer, the percentage will be applied to the market value that would correspond to the vehicle if it were new.
If the vehicle is considered as energy efficient, the valuation can be reduced up to 30%.
Taxation of loans as payments in kind
If the company that employs you grants you a loan, the difference between the interest paid and the legal interest of the money in the period in question will be considered as payment in kind.
Other exempt payments in kind
The following income from work in kind that a worker receives does not have to be paid in the Personal Income Tax, in each case with its limits and accomplishing certain requirements:
- Shares of the company itself. As long as they do not exceed 12.000 Euro per year.
- Amounts allocated to updating, continued training or refresher courses when they are required by the developing of the worker activities or job characteristics.
- Delivery of food vouchers at discounted prices that are made in canteens, dining rooms of the company or social stores whose amount does not exceed 9 Euro per day.
- Goods destined to social and cultural services, such as social clubs, reading rooms, medical services of the company or sports facilities, for example.
- Workers accident or civil liability insurance.
- Insurance for sickness coverage, being able to reach your spouse or descendants. The premiums must not exceed 500 Euro per year per insured person or 1.500 in case of disability to be exempt.
- Service of education to the children of workers of authorized educational centres.
- Public transport service between your home and the workplace, with amounts that cannot exceed 1.500 Euro per year and 136,36 Euro per month. If the transport is private, the limit is 0,19 Euro per kilometre.
There are other assumptions and types of income in kind that are taxed in the IRPF. We encourage you to consult all your questions with GM Tax or, if you prefer, we can make the income fulfilment for you. Contact us without any obligation.